APH - Embedded Expectations Analysis - 2021 03 16
Amphenol Corporation (APH:USA) currently trades near historical highs relative to UAFRS-based (Uniform) earnings, with a 28.6x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about sustaining organic sales growth, end-market disruptions, and competition in the interconnect industrySpecifically, management may lack confidence in their ability to sustain organic and mobile device sales growth and adapt their products to meet the needs of new car innovations. Furthermore, they may have concerns about the pace of their share repurchasing program and the impact of pandemic disruptions on the commercial air and automotive markets. Additionally, management may lack confidence in their ability to continue matching end-market demand and adapt to changing competitive pressures in the interconnect industry. Finally, they may be exaggerating the benefits of their diverse end-market exposure and the strength of their positioning in factory automation and instrumentation
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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