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Valens Research

Valens Equity Insights and Inflections - 2019 07 17

ARMK currently trades below recent averages relative to UAFRS-based (Uniform) Earnings, with a 14.6x Uniform P/E. At these levels, the market is pricing in expectations for Uniform ROA to decline from 24% in 2018 to 14% in 2023, accompanied by 6% Uniform Asset growth going forward. However, analysts have somewhat less bearish expectations, projecting Uniform ROA to only fall to 22% through 2020, accompanied by 3% Uniform Asset growth. Moreover, management is confident about FSS margins, their balance sheet, and their ability to meet expectations for business synergies. Should ARMK see profitability improve or remain flat, as positive management sentiment would suggest, upside would be warranted.

LEA Q1 2019 Embedded Expectations Analysis – Market expectations are for a decline in Uniform ROA, but management is confident about production growth and margin expansion.


WGO Q3 2019 Embedded Expectations Analysis – Market expectations are for a decline in Uniform ROA, but management is confident about growth, cost management, and manufacturing.

AVGO Q2 2019 Embedded Expectations Analysis – Market expectations are for further declines in Uniform ROA, and management has concerns about demand uncertainty, tariffs, and shareholder returns.

BMRN, BURL, CHTR, CRM, DISH, GDDY, HFC, IPGP, LEA, LEVI, MDLZ, MGM, NEE, ORCL, PEP, WGO.
Underlyings
Aramark

Aramark is a provider of food, facilities and uniform services. The company manages its Food and Support Services (FSS) business in segments split between its United States and International operations. The company's FSS segments manage a number of interrelated services-including food, hospitality, procurement and facility services-for school districts, colleges and universities, healthcare facilities, businesses, sports, entertainment and recreational venues, conference and convention centers, national and state parks and correctional institutions. The company's Uniform and Career Apparel segment provides employee uniform solution, including design, sourcing and manufacturing, delivery, cleaning and maintenance.

BioMarin Pharmaceutical Inc.

BioMarin Pharmaceutical is a biotechnology company that develops and commercializes therapies for people with serious and life-threatening rare diseases and medical conditions. The company's commercial products are Aldurazyme (laronidase) for Mucopolysaccharidosis I; Brineura (cerliponase alfa) for the treatment of late infantile neuronal ceroid lipofuscinosis type 2; Kuvan (sapropterin dihydrochloride) for the treatment of phenylketonuria; Naglazyme (galsulfase) the treatment of Mucopolysaccharidosis VI ; Palynziq (pegvaliase-pqpz) for adult patients with phenylketonuria; and Vimizim (elosulfase alpha) for the treatment of Mucopolysaccharidosis IV Type A.

Broadcom Inc.

Broadcom, via its subsidiaries, is a designer, developer and supplier of a range of semiconductor and infrastructure software solutions. The company develops semiconductor devices with a focus on digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products. The company provides products that are used in end products such as enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, and factory automation. The company has three segments: semiconductor solutions, infrastructure software and intellectual property licensing.

BURLINGTON STORES INC.

Burlington Stores is a holding company. Through its indirect subsidiary, Burlington Coat Factory Warehouse Corporation sells merchandise including: women's ready-to-wear apparel, accessories, footwear, menswear, youth apparel, baby, home, coats, beauty, toys and gifts. The company operates stores under the names Burlington Stores, Cohoes Fashions, Super Baby Depot, MJM Designer Shoes and an online store. Cohoes Fashions provides products similar to those offered by Burlington Stores. MJM Designer Shoes provides moderately priced designer and fashion shoes. The Super Baby Depot stores provides baby clothing, accessories, furniture and other merchandise in the middle to higher price range.

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.

DISH Network Corporation Class A

DISH Network is a holding company. Through its subsidiaries, the company operates two business segments: Pay-TV and Wireless. The company provides pay-TV services under: the DISH? brand, which consists of, among other things, Federal Communications Commission licenses authorizing the company to use direct broadcast satellite and Fixed Satellite Service spectrum, the company's owned and leased satellites, and certain other assets utilized in the company's operations; and the Sling? brand, which consists of, among other things, live-linear streaming over-the-top Internet-based domestic, international and Latino video programming services. In addition, the company invests to acquire certain wireless spectrum licenses and related assets.

GoDaddy Inc. Class A

GoDaddy is a technology provider to small businesses, web design personnel and individuals, delivering cloud-based products and personalized Customer Care. The company provides hosting, presence and business applications products and services. The company provides applications and access to relevant third party products helping them connect to their customers, manage and grow their businesses and get found online. The company has designed and developed a set of cloud-based technology products enabling its customers to establish a digital presence, connect with their customers and manage their ventures.

HollyFrontier Corporation

HollyFrontier is a petroleum refiner that produces products such as gasoline, diesel fuel, jet fuel, other lubricant products, and specialty and modified asphalt. The company's segments are: Refining, which involves the purchase and refining of crude oil and wholesale and marketing of refined products; Lubricants and Specialty Products, which includes the production of lubricant products such as base oils, white oils, other products and finished lubricants; and the company's subsidiary, Holly Energy Partners, L.P., which owns and operates logistics and refinery assets consisting of petroleum product and crude oil pipelines, terminals, tankage, loading rack facilities and processing units.

IPG Photonics Corporation

IPG Photonics is a developer and manufacturer of a line of fiber lasers, fiber amplifiers and diode lasers that are used in various applications, primarily in materials processing. The company designs and manufactures a range of optical fiber-based lasers and amplifiers. The company also makes packaged diodes, direct diode lasers, laser systems and communications components and systems. A majority of the company's products are designed to be used as general-purpose energy or light sources.

Lear Corporation

Lear is a supplier to the automotive industry. The company supplies seating, electrical distribution systems and electronic modules, as well as related sub-systems, components and software, to automotive manufacturers. The company has two segments: Seating, which consists of the design, development, engineering, just-in-time assembly and delivery of seat systems, and the design, development, engineering and manufacture of seat components; and E-Systems, which consists of the design, development, engineering and manufacture of electrical distribution systems, and electronic control modules, electrification products, connectivity products and software solutions for the cloud, vehicles and mobile devices.

Levi Strauss & Co. Class A

Levi Strauss & Co. is an apparel company. Under its Levi's?, Dockers?, Signature by Levi Strauss & Co.? and Denizen? brands, the company designs, markets and sells, directly or through third parties and licensees - products that include jeans, casual and dress pants, tops, shorts, skirts, jackets, footwear, and related accessories for men, women and children around the world. The company licenses its Levi's? and Dockers? trademarks for a variety of product categories in multiple markets in each of its regions, including footwear, belts, wallets and bags, outerwear, sweaters, dress shirts, kidswear, sleepwear and hosiery. The company's operates its business via three geographic regions: Americas, Europe and Asia.

MGM Resorts International

MGM Resorts International is a holding company. Through its subsidiaries, the company owns and operates casino, hotel, and entertainment resorts across the United States and in Macau. The company's segments include: Las Vegas Strip Resorts, which consists of casino resorts such as Bellagio, MGM Grand Las Vegas, Mandalay Bay, The Mirage, Luxor, New York-New York, Excalibur, and Park MGM; Regional Operations, which consists of casino resorts such as MGM Grand Detroit, Beau Rivage, Gold Strike Tunica, Borgata, MGM National Harbor, MGM Springfield, Empire City, and MGM Northfield Park; and MGM China, which owns and operates casino resorts and the related gaming subconcession and land concessions.

Mondelez International Inc. Class A

Mondelez International sells food and beverage products. The company makes and sells primarily snacks, including biscuits (cookies, crackers and salted snacks), chocolate, gum and candy, as well as various cheese and grocery and powdered beverage products. The company's portfolio includes snack brands such as Cadbury, Milka and Toblerone chocolate; Oreo, belVita and LU biscuits; Halls candy; Trident gum and Tang powdered beverages. The company's operations and management structure are organized into four operating segments: Latin America; Asia, Middle East and Africa; Europe; and North America. The company sells its products to supermarket chains, wholesalers, supercenters, value stores and other retail food outlets.

NextEra Energy Inc.

NextEra Energy is a holding company, engaged in electric power and energy infrastructure. The company has two principal businesses, Florida Power & Light Company (FPL) and NextEra Energy Resources, LLC (NEER). FPL is a rate-regulated electric utility engaged primarily in the generation, transmission, distribution and sale of electric energy in Florida. FPL provides service to its electric customers through a transmission and distribution system that links its generation facilities to its customers. NEER, through its subsidiaries, owns, develops, constructs, manages and operates electric generation facilities in wholesale energy markets primarily in the United States and Canada.

Oracle Corporation

Oracle provides products and services that address enterprise information technology (IT) environments. The company's products and services include applications and infrastructure offerings. The company's cloud and license business engages in the sale, marketing and delivery of its applications and infrastructure technologies through cloud and on-premise deployment models including its cloud services and license support offerings; and its cloud license and on-premise license offerings. The company's hardware business provides Oracle Engineered Systems, servers, storage, industry-specific hardware, operating systems, virtualization, management and other hardware-related software to support diverse IT environments.

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.

Salesforce.com inc.

Salesforce.Com is engaged in customer relationship management technology. The company's Customer 360 is an integrated platform that unites sales, service, marketing, commerce, integration, analytics and more to give companies a single, shared view of their customers. Through its platform and other developer tools, the company also enables third parties to develop additional functionality and applications, or apps, that run on its platform, which are sold separately from or in conjunction with the company's service offerings. The company's cloud service offerings include sales cloud, service cloud, marketing and commerce cloud, and salesforce platform and other.

Winnebago Industries Inc.

Winnebago Industries is a manufacturer with a portfolio of recreation vehicles and marine products used primarily in leisure travel and outdoor recreation activities. The company's reportable segments include: Towable, which is comprised of products which are not motorized and are generally towed by another vehicle as well as other related manufactured products and services; and Motorhome, which is comprised of products that include a motorized chassis as well as other related manufactured products and services. The company's subsidiary, Chris-Craft USA, Inc., manufactures and sells boats in the recreational powerboat industry through a network of independent authorized dealers.

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Valens Research

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  • GAAP and IFRS have failed to provide rules for reliable financial statement reporting
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Many years later, our business model remains because little has changed on Wall Street.

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