BCO - Embedded Expectations Analysis - 2020 10 16
The Brink's Company (BCO:USA) currently trades near historical averages relative to UAFRS-based (Uniform) earnings, with a 19.3x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about their acquisitions, coronavirus recovery, and revenue declinesSpecifically, management may lack confidence in their acquisition of G4S and their ability to meet projected EBITDA margins in 2020. Additionally, they may lack confidence in their ability to manage cost structure and emerge from the crisis as strong as ever. Furthermore, they may be exaggerating the need for enhanced cash safety in a post-pandemic world and may be concerned about the sustainability of improvement in South American countries in recovering from coronavirus. Finally, management may lack confidence in their ability to mitigate revenue declines and generate significant cash flow
Brink's is engaged in total cash management, route-based logistics and payment solutions including cash-in-transit, automated teller machine (ATM) services, cash management services, including vault outsourcing, money processing, and safe services, and international transportation of valuables. The company's service offerings, among others, include: cash-in-transit services, which include the transportation of cash between businesses and financial institutions; ATM services, which provide customers who own and operate ATMs a variety of service options; global services, which provide transportation of commodities; and CompuSafe? service, which provides a closed-loop system.
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
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