12+ Top Home Office Accessories Ideas – Home Office Accessories Ideas
ACCO Brands Corporation (ACCO) is a arch supplier of branded customer and business products. Readers are acceptable best accustomed with their Swingline staplers and Mead notebooks, but they additionally advertise items alignment from laminators to ability tools.
On October 27, afterwards bazaar close, they appear 3Q20 results. The banal didn’t move much, as there was no change in the ahead appear 2020 FCF ambition of $100M ($120M OCF beneath $20M capex). But we anticipate the abatement arch up to earnings, accompanying with the COVID-19 sell-off from $10.00/share in February, has created a mispricing opportunity.
5-yr Chart
Source: Seeking Alpha
We anticipate there are two capital affidavit why the banal has not absolutely recovered from the communicable sell-off (as best added stocks have): 1) the commensurable sales and 2) the debt.
In 2019, ACCO, finally, alternate to absolute commensurable sales afterwards several years of abrogating amoebic growth.
Historical Financial Performance
Source: August 2020 presentation (slide 27)
The commensurable sales advance was alone 0.8%, but ACCO is a actual complete aggregation (founded in 1903), and its markets are not what you would accede “high-growth”. Their anticipation is for abiding advance of collapsed to up 2%, apprenticed by all-embracing markets such as Asia and South America (for North America, the abiding angle is absolutely accepted to be collapsed to bottomward 2%).
It’s accurate that the academy and appointment food categories are in civil decline, as the acceleration of paperless files reduces the charge for cardboard and cardboard accumulator products. Still, we do not anticipate the appeal for these food will abandon altogether. ACCO is in an banal business, but it is a banknote cow, and so the flattish amoebic advance projected by administration does not affair us.
The added acumen why we anticipate the banal has been over-punished is because of the debt. As of 3Q20, absolute debt stood at $912M, with an added $269M in alimony obligations. These accountability amounts are high, but the abounding boilerplate absorption amount of 3.5% is appealing low, and there are no cogent debt maturities until 2024.
With alone $86M of cash, they will absolutely charge to refinance a ample allocation of the debt aural the abutting few years. But we anticipate the FCF bearing is acceptable such that the new refinanced absorption ante will not be exorbitant. Administration has said that they are suspending allotment repurchases to focus on debt reduction, and we acclaim this decision.
ACCO, currently, pays $0.26/share, which yields about 4.7% and requires about $25M anniversary year to service. Conceivably, the allotment could be cut or abeyant to advance debt reduction, but this is consistently an abhorred maneuver. For 3Q20, operating assets was $34M and absorption amount was $10M, so the absorption advantage arrangement does not assume a affair at this time, and we don’t yet see the charge for an actual allotment cut.
Since mid-2016, ACCO had hovered about the $10.00/share akin afore the crushing COVID-19 sell-off of this year. Previous 2020 guidance, provided on February 11, was for FCF of $170M and adapted EPS of $1.25. Not surprisingly, the admonition was aloof on April 13 because of the ambiguity created by the pandemic. But alike bold the new admonition for this year is the new normal, the appraisal is still attractive.
As of September 30, the adulterated allotment calculation stood at 95.6M. If we accommodate the 8M anti-dilutive shares that were not included in the ciphering of adulterated EPS, the absolutely adulterated allotment calculation comes to 103.6M. Using the October 30 closing amount of $5.27/share gives a absolutely adulterated bazaar cap of $546M. This makes the advanced P/FCF according to 5.5x, bold the 2020 FCF admonition of $100M is at a minimum akin for abutting year.
It could actual able-bodied alike be added than this, as they abide to focus on amount reductions. Or things ability go absolutely aback to the operating altitude that led them to initially adviser for 2020 FCF of $170M. But alike aloof blockage at the accepted akin makes the appraisal attractive.
We are not assured a home run from this investment. But we anticipate there is a acceptable adventitious of a acknowledgment to a added accustomed P/FCF ratio. Alike aloof a jump to 8x would advance to an accepted bazaar cap of $800M, which would accord us a acknowledgment of 47% and a PT of $7.72/share. But a abounding accretion to the $10.00/share akin is not out of the question, befitting in apperception that the banal has traded about this akin back 2016.
We anticipate the affairs of a quick 40-80% acknowledgment are high, and we anticipate ACCO is a Buy.
(Note: On folio 22 of the 3Q20 10-Q, it says that the potentially dilutive shares accept exercise prices that are college than the accepted bazaar price. To be conservative, we accommodate all anti-dilutive shares in the absolutely adulterated allotment calculation regardless).
Disclosure: I/we accept no positions in any stocks mentioned, but may admit a continued position in ACCO over the abutting 72 hours. I wrote this commodity myself, and it expresses my own opinions. I am not accepting advantage for it (other than from Seeking Alpha). I accept no business accord with any aggregation whose banal is mentioned in this article.
Additional disclosure: Disclaimer: The Elle Investments portfolio is managed utilizing a “quantamental” access area anniversary position, while based on Fundamental Analysis, is sized as allotment of a beyond quantitative portfolio. The annotation presented actuality is for analysis purposes alone and is not to be taken as advance advice. Readers are accepted to accomplish their own due activity and/or appoint an advance able above-mentioned to entering/exiting positions. Published analysis account are accompanying to the specific bazaar amount and about accessible advice at the time of analysis submission/publication. Elle Investments will enter/exit positions after notice.
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