WRK - Embedded Expectations Analysis - 2018 02 15
─ WestRock Company (WRK:USA) currently trades around recent averages relative to UAFRS-based (Uniform) Earnings, with a 14.8x Uniform P/E, implying bearish expectations for the firm. Moreover, management has concerns about growth, their KapStone acquisition, and costs─ Specifically, management may lack confidence in the sustainability of sales growth, and may be concerned about their ability to maintain daily box shipment improvements in North America. Furthermore, they may lack confidence in their ability to become a leader in the growing Consumer and Corrugated Packaging segments as a result of the KapStone acquisition, and may be exaggerating the extent to which KapStone will broaden their portfolio of solutions. Moreover, they may be downplaying their expectations for significant inflation in OCC prices, and may be concerned about their forward integration rate
WestRock is a provider of paper and packaging solutions for consumer and corrugated packaging markets. The company partners with its customers to provide paper and packaging solutions. The company's operating and business locations are in North America, South America, Europe, Asia and Australia. The company's segments include: Corrugated Packaging, which consists of the company's containerboard mills, corrugated packaging and distribution operations, as well as its merchandising displays and recycling procurement operations; Consumer Packaging, which consists of the company's consumer mills, food and beverage and partition operations; and Land and Development, which sells real estate primarily in the Charleston, SC region.
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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