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:
Quanta Services Inc. is going to capitalize on favorable market conditions, as well as an environment for growth. With new management, they have a solid growth strategy in place to develop organically and through M&A. Overall, widening margins and changing scope of the business will lead to value creation and thus stock appreciation. I think they are priced around their 52-week high for solid reasons, and more double digit growth can be expected.
Barnes Group is a global leader in the design and engineering process of precision parts and products to end markets through their two business segments, aerospace and industrials. Barnes Group has experienced consistent double-digit organic sales growth and operating income growth in the mid-teens year over year. Through recent acquisitions, Barnes Group continues to expand globally into Europe and Asia positioning itself to continue to be a global leader in its precision molds and nitrogen gas products as well as being able to continue to supply leading corporations such as General Electric and Rolls-Royce in its Aerospace segment. Value creation for Barnes Group depends on earnings continuing to beat analyst estimates and continued growth in revenue and margins.
Steven Madden LTD is a leader in the footwear and apparel industry. Steven Madden generates the majority of their revenue from their wholesale women’s footwear segment. This segment has been experiencing double-digit growth and can continue to see this growth through the rest of 2017 and 2018 as well. Steven Madden LTD., generates their value from increasing revenues, consistently exceeding earnings estimates, acquisitions of competitors, and a growing international segment.
CLF has strong growth factors due to their control over the iron ore business in the Great Lakes region, their ability to maintain profitable long-term relationships due to their high quality standard, and emergence into the EAF market with an innovative product. The value creation for this stock will be based around their implementation of their HBI production plant. Furthermore, China’s decrease in production will lead to an increase in domestic demand of which CLF controls 55%. We can expect the net income and adjusted EBITA to more than double through 2018 due to an increase in revenue.
Brink’s is a leading provider of security services worldwide. After releasing improved 2nd quarter earnings, the company is in position to continue growing past their targets in 2019. Synergies derived from tactical acquisitions in already existing markets will immediately generate earnings, creating short-term growth for the firm. In terms of long-term growth, closing the margin gap between Brink’s and their most successful U.S. competitors serves as the key driver for this stock. Through operational excellence, they have already began to do so as last quarter’s operating margin was up 2.1% in North America. By increasing margins and market share in existing markets through operating excellence, Brink’s will continue growing towards being the premier security service provider worldwide.
The Children’s Place is one of the largest children’s apparel retailers. With the bankruptcy of their largest competitor and growth with digital sales over the next few years, the company’s EPS will continue to increase at the exponential rate that it did this past year. Due to these large EPS and EDITDA increases I believe that The Children’s Place in undervalued.
Foot Locker is well positioned in the premium footwear and apparel market. Foot Locker’s revenues will get a boost from new sneaker styles coming out later this year. Foot Locker will be able to reduce cost by closing down underperforming brick-and-mortar stores. I advise to buy Foot Locker because its stock price is currently undervalued. I expect the price of this stock to rise in the future from $35.12 to $49.44.
Paycom represents an opportunity for growth in the short and long term. The information technology industry alone is a great investment based on the constant need for innovation and simplification of tasks in the business sector. Combined with Paycom’s outperforming revenues and tremendous quarter over quarter growth, the company has established a solid foundation for success. To continue this success and boost sales even higher, Paycom has begun to solidify its position in existing markets, while at the same time expanding into new markets. The U.S. based company eventually plans on expanding internationally, opening up a whole new world of opportunity. To solidify its position long-term, Paycom focuses on innovation through research and development. In this highly competitive industry, Paycom is aware that product differentiation means everything.