ACCO Brands: Much More than Staples

Feb.26.07 | About: ACCO Brands (ACCO)

An interesting spin-off company is the Lincolnshire, Illinois based office products supplier, ACCO Brands Corporation (NYSE:ABD), which is best known for its Swingline brands of staplers.

ABD markets its products through its own sales force and distribution networks in over 100 countries. Founded in 1903, the company spun-off from parent Fortune Brands, Inc. (FO) on August 16, 2005. It is now a constituent in our Clear Spin-Off Index [CLRSO] which is licensed for the EFT symbol (NYSEARCA:CSD).

Managing about 8,000 employees, ABD makes more than half of their sales to leading companies that include Office Depot Inc. (NYSE:ODP), Staples Inc (NASDAQ:SPLS), OfficeMax Inc. (NYSE:OMX), Wal-Mart Stores Inc. (NYSE:WMT), United Stationers (USTR) and Tech Data Corp. (NASDAQ:TECD), among others.
Their product branches include workspace tools, document communication products, visual communication products, storage and organization products, computer accessories, time management tools, and digital print and document finishing. Some of the branded products in these branches include staplers, shredders, report covers, laminating machines, white boards, overhead projectors, filing systems, accounting supplies, keyboards, planners and calendars.

Already the world's largest publicly traded supplier of branded office products with a market capitalization of $1.21 billion, ABD is still looking forward to growth. To keep pace with the global trends of growth in white collar employment, offices, home offices and computer usage, the company has been expanding its operations. On the day that it became publicly traded, the firm merged with General Binding Corporation, a company with its own line of brand name office products. Its brand name lines are also expanding, with mobile computing accessories brand Kensington adding nine high tech products last month (including a Bluetooth Internet Phone and iPod travel speakers).

The business strategy of ABD has translated into an impressive fundamental overview. Revenues have increased over the past year by 31.16%. Its year over year quarterly revenue growth is only 1.30% however, matching the average of the industry. As for profitability, its trailing twelve month operating margins of 6.69% are above its peer group average of 3.57%, while its gross margin of 29.68% is just below the industry average of 33.22%.

At first glance, an analysis of the market valuation of ABD indicates an overvalued equity, especially based upon a price to earnings (P/E) ratio of 161.79. However, we can see that the reason for this is the temporary fall of income due to an infrequent event -a charge for the closure of a plant in Nogales, Mexico. Another factor is the interest charge for financing the purchase of General Binding Corporation. This acquisition redeems itself in the growth figures, bringing ABD's price to earnings to growth [PEG] ratio down to 1.49, below the office supplies industry average of 1.52.

These calculations all seem to point to possible stock price appreciation, so we are excited to see how this spin-off will maintain its growth and profitability and will ultimately pan out for our index and the ETF [CSD].

Disclosure: ACCO Brands Corporation [ABD], is a constituent in the Clear Spin-Off index licensed for the Claymore/Clear Spin-Off ETF [AMEX:CSD]. Mr. Corn is CEO and founder of Clear Indexes LLC which publishes the index and he owns shares of the ETF: CSD. He does not directly own shares in [ABD].

ABD 1-yr chart

abd chart