AYI - Embedded Expectations Analysis - 2021 05 06
Acuity Brands, Inc. (AYI:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 19.8x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, and management may have concerns about supply chain constraints, electrical component shortages, and their EPS performanceSpecifically, management may have concerns about finished goods import logistics, customer inventory rebalancing, and the strength of their relationships with governments in Mexico. Furthermore, they may lack confidence in their ability to mitigate supply chain constraints, incur only essential travel and marketing expenses, and sustain EPS improvements. Finally, they may have concerns about the global electrical component shortage, and they may be overstating the potential of their sales agency consolidation and the demand improvement across end markets
Acuity Brands is a provider of lighting and building management solutions and services for commercial, institutional, industrial, infrastructure, and residential applications. The company's lighting and building management solutions include devices such as luminaires, lighting controls, controllers for various building systems, power supplies, prismatic skylights, and drivers, as well as integrated systems designed for various indoor and outdoor applications. In addition, the company provides services across applications that primarily relate to monitoring and controlling lighting and building management systems through network technologies and the commissioning of control systems.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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