Advanced Drainage Systems: Inside Selling Is Worth A Thousand Words
- Advanced Drainage Systems is the leading US manufacturer of plastic pipe, used in the waste management, infrastructure and construction sectors.
- If your first reaction to that was “sounds like a tough industry”, you’d be right – margins and returns are typically low, in the mid-single digits.
- The stock is trading on optimistic growth forecasts and huge margin expansion, both of which seem misplaced and reliant on external factors.
- We argue that the correct price for a commoditized, low-quality business in a cyclical sector is far from the 20x+ EV/EBIT on which the stock is trading.
- .. But you don’t just have to take our word for it – the private equity house which took the business public is aggressively selling down its stake.
Advanced Drainage Systems: Let The Share Price Drain Be Your Gain
- WMS should be currently operating exclusively on its revolving credit facility.
- WMS has more debt, contractual obligations, and operating expenses coming due, at best, over the next 36-48 months than it has borrowing capacity and cash flow generation capability.
- WMS is operating at max levels of efficiency and has a mature operation overall, greatly limiting its ability to improve revenue growth from current levels.
- The leading manufacturer of high performance thermoplastic corrugated pipe.
- For the March 2014 year WMS's revenues increased to $1.069 billion, up 5% from the year before. Net income declined 57% to $13 million.
- The P/E based on fiscal 2014 is 73, very high for a mundane business. The price-to-sales ratio is .9.
Signs Of Growth With Advanced Drainage Systems IPO
- WMS, a leading manufacturer of high performance plastic pipe and other water management products, plans to raise $261.0 million in its upcoming IPO.
- WMS has a history of profitability, and should continue to grow its market share and has the opportunity to penetrate more geographic markets.
- We are also encouraged by the demonstrated stability of the firm's management team and suggest investors consider getting a piece of this IPO.
Nov. 12, 2014, 1:33 PM
Nov. 8, 2014, 9:25 AM
- Energy companies finally are starting to halt a few new U.S. drilling projects as oil prices fall, which Barclays believes may put the U.S. oil boom at risk but "on balance, we believe lower oil prices are good.”
- If strong U.S. energy growth is interrupted, spending in the sector could be cut by $40B, but consumers could save $70B next year as the price at the pump falls for gasoline and diesel, according to Barclays head of U.S. equity strategy Jonathan Glionna.
- The most likely beneficiaries would be discretionary areas such as restaurants, entertainment, apparel, electronics and furniture, he says.
- Glionna lists 27 stocks that could benefit from lower oil prices: AAL, AGCO, AXL, BERY, BLMN, BWLD, CHH, CLX, DE, DPZ, FDX, GM, HD, KMB, KR, KSS, MHK, MMM, PENN, PPG, SAVE, SHW, TGT, UPS, VAL, WMS, WMT.
Nov. 5, 2014, 7:39 AM
Sep. 3, 2014, 7:47 AM
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