KEYS - Embedded Expectations Analysis - 2021 02 05
Keysight Technologies (KEYS:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 27.7x Uniform P/E. At these levels, the market has expectations for profitability to remain flat, but management may have concerns about revenue growth, margin expansion, and Chinese order headwindsSpecifically, management may lack confidence in their ability to sustain record revenue performance at their Communications and Electronic Industrial Solutions groups, drive margin expansion, and maintain their strong backlog position. In addition, they may have concerns about the sustainability of government-mandated EV tailwinds, the progress of their share repurchases execution, and continued order headwinds from Chinese trade restrictions. Furthermore, management may be overstating the potential of their SGS and Qualcomm collaboration, the capabilities of cloud-based processing and advanced analytics, and their position to capitalize on future growth opportunities. Also, they may lack confidence in their ability to fully capitalize on their broad footprint in China, and closely monitor international regulations
Keysight Technologies is a technology company. The company's segments are: Communications Solutions Group, which provides electronic design and test software, instruments and systems and related services used in the simulation, design, validation, manufacturing, installation and optimization of electronic equipment; Electronic Industrial Solutions Group, which provides test and measurement solutions and related services across a set of electronic industrial end markets; and Ixia Solutions Group, which helps customers design, validate and support the performance and security of their networks and associated components and applications.
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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