Assa Abloy (OTCPK:ASAZY)
has a lot of the traits that investors looking for high-quality
companies ought to prize. The company generates good returns on capital
and consistently generates good cash flow from its revenue base. It also
has a market leadership position, but operates in a market that still
leaves it ample room to expand and grow. While the organic growth rate
has been pretty dismal over most of the past decade, the severe
disruptions to the construction markets in Western Europe after the
collapse of the credit bubble certainly created some headwinds.
The
problem (and if there was ever going to be a Stephen Simpson Seeking
Alpha drinking game, this is where you'd take a shot) is valuation. Even
amidst the crapalanche that is the year-to-date global equity market,
Assa Abloy isn't cheap enough for me. Assa Abloy is almost never cheap,
and I won't argue that it should be; it's a well-run company with great
share. What's more, North American and Western European non-residential
and residential construction look like good markets to be in for 2016.
Nevertheless, I just can't connect the dots and come up with a valuation
that makes me a willing buyer at today's price.
Read more here:
Assa Abloy Has Growth Locked Up
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