OUTLINE:
*Each target price is (1) computed using CGFS' proprietary valuation and simulation approach and (2) adjusted within 3 standard errors of the estimate. Assumption and computation details are inserted at the end of each write-up.
This Week's Picks:
- Our Weekly Stock Picks*
- Macro Environment
- The Bond Report, What's next, & Key Earnings
*Each target price is (1) computed using CGFS' proprietary valuation and simulation approach and (2) adjusted within 3 standard errors of the estimate. Assumption and computation details are inserted at the end of each write-up.
This Week's Picks:
- Regal Entertainment is the domestic industry leader for operating multi-screen theaters and providing a premium movie-going experience.
- In a mature industry, Regal has proven they are not done producing with an EBITDA compounded annual growth rate of 5% over several years.
- Gross margins are forecasted to increase with the investment of premium amenities alongside the slate of movies in 2017
- Acquire more assets through the addition of 3-5 new theaters with the closure of 6-10 with an open mind to an acquisition
For the next following year AAR corporation will ensure revenue growth with a large number of contract signed with different type of industries and organizations. At the same time, the company will be able to reduce the cost to meet government demand. This will ensure growing margin and profitability. Revenue increasing and profitability increasing will increase the EBIT and the free cash flow. Having a large amount of free cash is showing that the company is creating value. This value creation should be reflected in the stock price. I advise to buy AAR Corp. because it stock price is currently undervalued. I expect the price of this stock to rise in the future between $48.55 and $55.16
AOBC’s revenue is depending on the households’ income which is increasing since 2015. Moreover, because of the diversification of the company, AOBC’s products are available to everyone in outdoor retailers, which ones have seen their sales increasing through the years and will see them increasing for the next years. This will lead to an increase of AOBC’s revenues. Moreover, the company has hired a former VP in Vista who’s in charge on the outdoor department. This will help AOBC to successfully develop their diversification. AOBC has seen its margins increasing between 2015 and 2016, through a reduction costs policy. This has led to an increase of EBITDA and of its free cash flow. This increases lead to an increase of the company’s value.
Callaway seems to be in prime position to experience growth in 2017. Despite some setbacks in fiscal year 2016 and a slow performance in Q4, there are still indications that point towards future growth. Stock price dropped more than 8% as a result, but revenues and earnings still increased overall from 2015. An agreement with an individual Japanese venture and the acquisition of a U.S. golf bag manufacturer should allow for the company to experience growth in newer markets. Callaway differentiates itself from competitors in terms of market position, as they continue to seize market share abroad and find attractive investment opportunities through foreign partnerships and tour representation.