Canaccord Genuity Morning Coffee on Pep Boys-Manny (PBY): Get Some Pep in Your Step
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Price: $25.00 --0%
Rating Summary:
3 Buy, 1 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 16 | Down: 11 | New: 13
Rating Summary:
3 Buy, 1 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 16 | Down: 11 | New: 13
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Canaccord Genuity Morning Coffee on Pep Boys-Manny (NYSE: PBY): Get some pep in your step.
Canaccord Genuity Portfolio Strategist Martin Roberge believes automotive industry sales should be brisk over the coming years as cyclical and secular forces should intertwine to unleash pent-up demand. Many years of meagre car purchases have led to an aging U.S. fleet of cars, up to an average age of 10.6 years according to the last data point. With time, consumers will have to replace their aging cars and/or spend on repairs (and thus auto parts) due to increased mileage on odometers. He notes that growth in U.S. consumption of auto and parts has already turned positive and should keep growing along with the economy. In line with Roberge’s thesis, a Barron’s article over the weekend highlights Pep Boys – Manny, Moe & Jack as a company that could benefit from increasing sales of auto parts. The stock currently trades at roughly 16x 2012 earnings and 12x 2013 earnings and while the article notes that those valuations are not inordinately cheap on an absolute level, they are well below historical valuations and below a P/E of 19x for the entire industry. Additionally, management which was put in place in 2007 is starting to see their efforts beginning to bear fruit. The company holds roughly $690 million in real estate assets excluding its four distribution centers and a small office in L.A. and its balance sheet boasts $80 million in cash. Once $295 million in debt is subtracted from the cash/real estate assets, $475 million is equal to three quarters of the company’s market cap. The article says investors are paying significantly less than it seems for the still improving underlying business, suggesting the stock may be undervalued.
Other stocks of note: AutoZone (NYSE: AZO), O'Reilly's (Nasdaq: ORLY), Advanced Auto Parts (NYSE: AAP), GM (NYSE: GM), and Ford (NYSE: F)
Canaccord Genuity Portfolio Strategist Martin Roberge believes automotive industry sales should be brisk over the coming years as cyclical and secular forces should intertwine to unleash pent-up demand. Many years of meagre car purchases have led to an aging U.S. fleet of cars, up to an average age of 10.6 years according to the last data point. With time, consumers will have to replace their aging cars and/or spend on repairs (and thus auto parts) due to increased mileage on odometers. He notes that growth in U.S. consumption of auto and parts has already turned positive and should keep growing along with the economy. In line with Roberge’s thesis, a Barron’s article over the weekend highlights Pep Boys – Manny, Moe & Jack as a company that could benefit from increasing sales of auto parts. The stock currently trades at roughly 16x 2012 earnings and 12x 2013 earnings and while the article notes that those valuations are not inordinately cheap on an absolute level, they are well below historical valuations and below a P/E of 19x for the entire industry. Additionally, management which was put in place in 2007 is starting to see their efforts beginning to bear fruit. The company holds roughly $690 million in real estate assets excluding its four distribution centers and a small office in L.A. and its balance sheet boasts $80 million in cash. Once $295 million in debt is subtracted from the cash/real estate assets, $475 million is equal to three quarters of the company’s market cap. The article says investors are paying significantly less than it seems for the still improving underlying business, suggesting the stock may be undervalued.
Other stocks of note: AutoZone (NYSE: AZO), O'Reilly's (Nasdaq: ORLY), Advanced Auto Parts (NYSE: AAP), GM (NYSE: GM), and Ford (NYSE: F)
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