Buying opportunity ahead of transformation

30 September 2022

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The company featured in this report has long been financially strong. It has paid a dividend for 43 of the past 44 quarters, and in 2021 achieved record earnings. Over the last ten years, it has bought back nearly 40% of its share capital.

Irrespective of these achievements, the stock has long been trading at cheap multiples, mainly because of its "boring" sector which is followed only by a few investors.

The appointment of a new CEO now makes for a compelling investment case. The CEO was hired with the explicit task of transforming the entire company, and to do so in a fashion similar to what she achieved in her previous job where she transformed a struggling regional company into a successful national brand, while creating over USD 10bn in additional wealth for shareholders.

The new head is financially independent and could have chosen any job she liked, but chose to get her teeth into this particular company. She is heavily incentivised through stock options that reward her once all shareholders make money off her work.

She will know that if she succeeds, the stock is likely to experience that perfect combination of growing earnings and so-called multiple expansion. Based on reasonable estimates, the stock offers about 200% upside between now and 2024.

This research report deals with a US-based company that is a value investment. It's among the market leaders in its field and a globally recognised brand name, with a multi-billion market cap.

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