Good write-up. And now I see it is in play, so I guess your thesis is validated! I am scratching my head a bit about the valuation - is there a margin of safety here? FCF yield is 2%. Negative tangible book. Hard to get too excited about 14x 2027e earnings.
It’s a nice business that could be held for years. An industry with real scale advantages. At this price, you’re right, there’s not much wiggle room for MOS.
Based on the EBITDA bridge from today to 2027... the improvement is split ~evenly between: 1) industry growth; 2) automation capex = operating leverage; and 3) recent acquisitions.
#1 and #3 are probably easier to underwrite while #2 is a question mark... they haven't seen much/any operating leverage as revenue doubled from $6bn to $11.5bn while EBITDA margins are flat.
To answer your question -- 10% revenue / 15% EBITDA growth maybe an upside case as opposed to base case? 5-10% and 10-15% seem like the base case to me...
Good write-up. And now I see it is in play, so I guess your thesis is validated! I am scratching my head a bit about the valuation - is there a margin of safety here? FCF yield is 2%. Negative tangible book. Hard to get too excited about 14x 2027e earnings.
It’s a nice business that could be held for years. An industry with real scale advantages. At this price, you’re right, there’s not much wiggle room for MOS.
how much credibility does the plan have?
Based on the EBITDA bridge from today to 2027... the improvement is split ~evenly between: 1) industry growth; 2) automation capex = operating leverage; and 3) recent acquisitions.
#1 and #3 are probably easier to underwrite while #2 is a question mark... they haven't seen much/any operating leverage as revenue doubled from $6bn to $11.5bn while EBITDA margins are flat.
To answer your question -- 10% revenue / 15% EBITDA growth maybe an upside case as opposed to base case? 5-10% and 10-15% seem like the base case to me...