SWK - Embedded Expectations Analysis - 2020 03 17
ï€ Stanley Black & Decker, Inc. (SWK:USA) currently trades near historical averages relative to UAFRS-based (Uniform) Earnings, with a 14.2x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management may be concerned about their CAM acquisition, macroeconomic headwinds, and the impact of COVID-19ï€ Specifically, management may be concerned about externally driven cost headwinds in their Tools & Storage segment, their CAM acquisition, and the sustainability of organic growth across its end markets. Moreover, they may lack confidence in their ability to improve margins due to potential macroeconomic headwinds, and they may be downplaying concerns about weakness across their auto and industrial industry end markets. Finally, management may lack confidence in their ability to sustain Craftsman double-digit POS performance, and they may be concerned about the impact of COVID-19 on their engineering facilities and production plants in China
Stanley Black & Decker is a provider of hand tools, power tools and related accessories, engineered fastening systems and products, services and equipment for oil and gas and infrastructure applications, commercial electronic security and monitoring systems, healthcare solutions, and automatic doors. The company's segments include: Tools and Storage, which is comprised of the power tools and equipment and hand tools, accessories and storage businesses; Industrial, which is comprised of the engineered fastening and infrastructure businesses; and Security, which is comprised of the convergent security solutions and the mechanical access solutions businesses.
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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