Report
Valens Research

Valens Equity Insights and Inflections - 2020 04 28

BZH currently trades below recent averages relative to Uniform earnings, with a 5.8x Uniform P/E (Fwd V/E'). At these levels, the market is pricing in expectations for Uniform ROA to decline from 13% in 2019 to 5% in 2024, accompanied by 3% Uniform asset contraction going forward. However, analysts have bullish expectations, projecting Uniform ROA to expand to 15% through 2021, accompanied by 2% Uniform asset growth. That said, management is excited about their efforts to simplify product offerings, and is confident about their EBITDA growth and Nashville openings. Current valuations appear to be pricing in overly bearish expectations for BZH, and should the firm just maintain current profitability levels, or improve and meet analyst expectations, as positive management sentiment suggests, material upside would be warranted.

MCD Q4 2019 Embedded Expectations Analysis – Market expectations are for record-high Uniform ROA, but management may be concerned about growth, franchisees, and menu items

HSY Q4 2019 Embedded Expectations Analysis – Market expectations are for Uniform ROA to expand, but management maybe concerned about pricing, growth, and Krave

LH Q4 2019 Embedded Expectations Analysis – Market expectations are for Uniform ROA to decline to record lows, but management is confident about growth, margins, and free cash flow

BZH, HSY, LH, MCD, AYX, BMY, CHTR, GIS, HD, IRM, JBL, K, MAR, PEP, PYPL, SABR, SERV, T, TSLA
Underlyings
Alteryx

Alteryx provides data science and analytics. The company's analytics platform comprises: Alteryx Designer, its data profiling, preparation, blending, and analytics product used to create visual workflows or analytic processes; Alteryx Server, its server-based product for scheduling, sharing, and running analytic processes and applications in a web-based environment; Alteryx Connect, its collaborative data exploration platform for discovering information assets and sharing recommendations across the enterprise; and Alteryx Promote, its analytics model management product for data scientists and analytics teams to build, manage, monitor, and deploy predictive models into production applications.

AT&T Inc.

AT&T is a holding company. Through its subsidiaries, the company is a provider of telecommunications, media and technology services. The company's Communications segment provides wireless and wireline telecom, video and broadband services. The company's WarnerMedia segment includes media and entertainment businesses that principally develop, produce and distribute feature films, television content, and other content globally; and operate digital media properties. The company's Latin America segment provides entertainment services in Latin America and wireless services in Mexico. The company's XANDR segment relies on using data from its customer relationships, to develop digital and video advertising that is relevant to consumers.

Beazer Homes USA Inc.

Beazer Homes USA is engaged as a homebuilder. The company's homebuilding operations consist of the design, sale, and construction of single-family and multi-family homes. The company purchases land or obtains an option to purchase land, which, in either case, requires certain site improvements prior to home construction. When available in certain markets, the company also buys finished lots that are ready for home construction. The company has investments with land developers, other homebuilders and financial partners to acquire land positions, to manage its risk profile and to utilize its capital base. The company also acts as the general contractor for the construction of its new home communities.

Bristol-Myers Squibb Company

Bristol-Myers Squibb is engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of biopharmaceutical products. The company's products are sold worldwide, primarily to wholesalers, specialty distributors, retail pharmacies, hospitals, government entities and the medical profession. The company manufactures products in the United States and Puerto Rico and has manufacturing operations in two foreign countries. The company has products in the following therapeutic classes: hematology, oncology, cardiovascular and immunology. The company's pharmaceutical products include chemically-synthesized or small molecule drugs and products produced from biological processes, called biologics.

Charter Communications Inc. Class A

Charter Communications is a holding company. Through its subsidiaries, the company is a cable operator and a broadband communications company providing video, Internet and voice services. The company also provides its mobile service to residential customers. In addition, the company sells video and online advertising inventory to local, regional and national advertising customers and communications and managed solutions to enterprise customers. The company also owns and operates regional sports networks and local sports, news and community channels. The company owns and operates a two-way telecommunications network which passes various households and small and medium businesses across United States.

General Mills Inc.

General Mills manufactures and markets branded consumer foods. The company's segments are: North America Retail, which provides cereals, refrigerated yogurt, soup, meal kits, dessert and baking mixes, frozen pizza and pizza snacks, grain, fruit and savory snacks, and organic products, among others; Convenience Stores and Foodservice, which provides snacks, yogurt, frozen meals and frozen dough products, and baking mixes, among others; Europe and Australia, which includes retail and foodservice businesses in the Europe and Australia region; Asia and Latin America, which consists of retail and foodservice businesses in the Asia and South America regions; and Pets, which includes pet food products.

Hershey Company

Hershey is engaged in the production of chocolate and non-chocolate confectionery. The company's segments are: North America, which is responsible for the company's chocolate and non-chocolate confectionery market position, and its grocery and snacks market positions, in the United States and Canada; and International and Other, in which the company has operations and manufactures product in China, Mexico, Brazil, India and Malaysia, and also distributes and sells confectionery products in export markets of Asia, Latin America, Middle East, Europe, Africa and other regions. The company's product offerings include chocolate and non-chocolate confectionery products, gum and mint refreshment products, snack and pantry items.

Home Depot Inc.

The Home Depot is a home improvement retailer. The company provides its customers an assortment of building materials, home improvement products, lawn and garden products, and decor products and provides a number of services, including home improvement installation services and tool and equipment rental. The company also maintains a network of distribution and fulfillment centers, as well as a number of e-commerce websites. The company provides a number of programs for its Professional Customers to meet their particular needs, and for its Do-It-Yourself and Do-It-For-Me customers, the company provides a number of installation services. The company also provides tool and equipment rentals for its customers.

Iron Mountain Inc.

Iron Mountain is a holding company. Through its subsidiaries, the company stores physical records and data backup media, providing information management solutions, and providing data center space for colocation and hyperscale deployments. The company's segments are: Global Records and Information Management Business, which provides records management, data management, information governance and digital solutions, secure shredding, and consumer storage; Global Data Center Business, which provides data center facilities; and Corporate and Other Business, which provides entertainment and media that helps industry clients store, safeguard and deliver physical media of various types.

Jabil Inc.

Jabil is a provider of manufacturing services and solutions. The company provides electronics design, production and product management services to companies in various industries and end markets. The company's manufacturing and supply chain management services and solutions include design, planning, fabrication and assembly, delivery and managing the flow of resources and products. The company's segments include: Electronics Manufacturing Services, which utilizes information technology, supply chain design and engineering, technologies centered on primary electronics; and Diversified Manufacturing Services, which provides engineering solutions, with a focus on material sciences, technologies and healthcare.

Kellogg Company

Kellogg is engaged in the manufacture and marketing of ready-to-eat cereal and convenience foods. The company's principal products are snacks, such as crackers, savory snacks, toaster pastries, cereal bars, granola bars and bites; and convenience foods, such as, ready-to-eat cereals, frozen waffles, veggie foods and noodles. The company's snacks brands are marketed under brands such as Kellogg's, Cheez-It, Pringles, Austin, Parati, and RXBAR. The company's cereals and cereal bars are generally marketed under the Kellogg's name, with some under the Kashi and Bear Naked brands. The company's frozen foods are marketed under the Eggo and Morningstar Farms brands.

Laboratory Corporation of America Holdings

Laboratory Corporation of America Holdings is a life sciences company that is focused on guiding patient care. The company reports its business in the following segments: LabCorp Diagnostics (LCD) and Covance Drug Development (CDD). LCD is an independent clinical laboratory business. LCD provides a menu of requested and specialty testing through a network of primary and specialty laboratories across the United States. CDD provides drug development, medical device and diagnostic development solutions from early-stage research to clinical development and commercial market access. CDD engages in early development and clinical trials in each therapeutic category.

Marriott International Inc. Class A

Marriott International is a worldwide operator, franchisor, and licensor of hotel, residential and timeshare properties under various brand names at different price and service points. The company has operations in the following reportable business segments: North American Full-Service, which includes the company's Luxury and Premium properties located in United States and Canada; North American Limited-Service, which includes the company's Select properties located in United States and Canada; and Asia Pacific, which includes all properties in the company's Asia Pacific region.

McDonald's Corporation

McDonald's franchises and operates McDonald's restaurants. The company's menu includes hamburgers and cheeseburgers, Big Mac, Quarter Pounder with Cheese, Filet-O-Fish, several chicken sandwiches, Chicken McNuggets, wraps, fries, shakes, McFlurry desserts, sundaes, soft serve cones, pies, soft drinks, coffee, McCafe beverages and other beverages. The company's restaurants in the United States and various international markets provide a full or limited breakfast menu. Breakfast offerings may include Egg McMuffin, Sausage McMuffin with Egg, McGriddles, biscuit and bagel sandwiches and hotcakes. The restaurants also sells a variety of other products during limited-time promotions

PayPal Holdings Inc

PayPal Holdings is a technology platform and digital payments company that enables digital and mobile payments on behalf of consumers and merchants worldwide. The company's combined payment solutions include its PayPal, PayPal Credit, Braintree, Venmo, Xoom and iZettle products and services. PayPal's payment solutions enable the company's customers to send and receive payments. PayPal helps merchants and consumers connect, transact, and complete payments, whether they are online, on a mobile device, in an app, or in person. The company provides proprietary payment solutions accepted by merchants that enable the completion of payments on the company's Payments Platform on behalf of its customers.

PepsiCo Inc.

PepsiCo is a food and beverage company. The company's segments include: Frito-Lay North America, which includes food and snack businesses in the United States and Canada; Quaker Foods North America, which includes cereal, rice, pasta and other food businesses in the United States and Canada; PepsiCo Beverages North America, which includes beverage businesses in the United States and Canada; Latin America, which includes beverage, food and snack businesses in Latin America; Europe, which includes beverage, food and snack businesses in Europe; and Africa, Middle East and South Asia, which includes beverage, food and snack businesses in Africa, the Middle East and South Asia.

Sabre Corp.

Sabre is a technology solutions provider to the travel and tourism industry. The company operates through three business segments: Travel Network, which consists primarily of its global distribution system (GDS) and a range of solutions that integrate with its GDS; Airline Solutions, which provides a portfolio of software technology products and solutions, through software-as-a-service (SaaS) and hosted delivery model, to airlines and other travel suppliers and provides software solutions; and Hospitality Solutions, which provides software and solutions, through SaaS and hosted delivery model, to hoteliers around the world.

Terminix Global Holdings Inc

ServiceMaster Global Holdings is a holding company. Through its subsidiaries, the company provides services to residential and commercial customers in the termite, pest control, cleaning and restoration markets, operating through a network of company-owned locations and franchise and license agreements. The company's portfolio of brands includes Terminix (residential termite and pest control), Terminix Commercial (commercial termite and pest control), Copesan (commercial national accounts pest management), ServiceMaster Restore (restoration), ServiceMaster Clean (commercial cleaning), Merry Maids (residential cleaning), Furniture Medic (cabinet and furniture repair) and AmeriSpec (home inspections).

Tesla Inc

Tesla designs, develops, manufactures, sells and leases electric vehicles and energy generation and storage systems, and provides services related to its products. The company operates as two reportable segments: automotive, which includes the design, development, manufacturing, sales, and leasing of electric vehicles as well as sales of automotive regulatory credits; and energy generation and storage, which includes the design, manufacture, installation, sales, and leasing of solar energy generation and energy storage products, services related to such products, and sales of solar energy system incentives.

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Valens Research
Valens Research

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
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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.

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