APH - Embedded Expectations Analysis - 2021 06 07
Amphenol Corporation (APH:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 27.8x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about supply chain challenges, recent acquisitions, and organic sales growthSpecifically, management may have concerns about the MTS test and simulation business sale, supply chain challenges in the automotive industry, and the sequential decline in mobile devices sales. Moreover, they may be exaggerating their ability to find acquisitions that solve customer problems and the growth and profitability improvement potential of Euromicron, Cabelcon, and MTS. Finally, management may lack confidence in their ability to sustain organic sales growth and operating income performance, and they may be overstating the strength of their MTS Sensors business
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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