Report
Valens Research

MSM - Embedded Expectations Analysis - 2019 08 26

MSC Industrial Direct Co., Inc. (MSM:USA) currently trades below recent averages relative to UAFRS-based (Uniform) Earnings, with a 13.3x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, and management has concerns about rising costs, the impact of tariffs, and further margin contraction

Specifically, management may be concerned about the sustainability of new account wins and their payout ratio. Furthermore, they may be concerned about the impact of tariffs on profitability, and may lack confidence in their ability to reduce passthrough costs from their suppliers. Moreover, they may be concerned about their ability to continue reducing their credit facility balance, and may be concerned about continued declines to operating profits in Q4. Finally, they may be concerned about ongoing headwinds in their government business and about further contraction in
gross margin
Underlying
MSC Industrial Direct Co. Inc. Class A

MSC Industrial Direct Co. is a distributor of metalworking and maintenance, repair and operations (MRO) products and services. The company provides stock-keeping units through its eCommerce channels, including its website, mscdirect.com; its inventory management solutions; catalogs and brochures; and call-centers and branches. The company's range of MRO products includes cutting tools, measuring instruments, tooling components, metalworking products, fasteners, flat stock, raw materials, abrasives, machinery hand and power tools, safety and janitorial supplies, plumbing supplies, materials handling products, power transmission components, and electrical supplies.

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Valens Research
Valens Research

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