APH - Embedded Expectations Analysis - 2020 09 14
Amphenol Corporation (APH:USA) currently trades near historical highs relative to UAFRS-based (Uniform) earnings, with a 26.7x Uniform P/E. At these levels, the market has somewhat bullish expectations for the firm, but management may have concerns about bandwidth demand, the automotive market, and their inventory levelsSpecifically, management may lack confidence in their ability to reverse recent GAAP diluted EPS declines and in the sustainability of production increases. Management may also have concerns about the sustainability of increased bandwidth demand and the performance of their medical business, and they may be downplaying concerns about IT datacom and industrial inventory levels. Additionally, they appear concerned about their ability to support this increased demand for bandwidth being driven by online video and remote work and school tools. In addition, they may be exaggerating their position in the mobile devices market, their resilience in the automotive market during the crisis, and their current liquidity levels. Finally, they may lack confidence in their ability to sustain strong instrumentation and heavy equipment performance
Amphenol is a designer, manufacturer and marketer of electrical, electronic and fiber optic connectors and interconnect systems, antennas, sensors and sensor-based products and coaxial and high-speed cable. The company's segments are: Interconnect Products and Assemblies, which designs, manufactures and markets a range of connector and connector systems, and other products, including antennas and sensors, used in a range of applications in a set of end markets; and Cable Products and Solutions, which designs, manufactures and markets cable, products and components for use primarily in the broadband communications and information technology markets as well as certain applications in other markets.
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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