Valeo (OTCPK:VLEEY) has been a trooper since I last wrote on this large auto parts supplier, with the ADRs up more than 20% and meaningfully outperforming peers like Continental (OTCPK:CTTAY) (up slightly), Denso (OTCPK:DNZOY) (down 10%), and BorgWarner (NYSE:BWA)
(down 40%). Better yet, the story seems to be getting better and
better, as the company is seeing strong order growth and management has
laid out a technological/product platform vision that really seems to
fit where OEMs are going with passenger vehicle designs and features.
I'm still bullish on Valeo and I've bumped up some of my
modeling assumptions since the last time I talked about the company. I
think long-term growth of 6% to 7% is a little aggressive (likely to be
more than double the underlying growth rate in unit production) but
do-able. Likewise, I'm a little concerned that mid single-digit FCF
margins could be ambitious given the company's history, but I think
leveraging past R&D investments and standing out from the crowd in
terms of product features and market share can support it.
Investors should note that Valeo's ADRs have only so-so
liquidity, so the local shares might be a better option for investors
willing to go that extra step.
Read more here:
Even After A Strong Run, Valeo Not Getting Its Full Due
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