Sunday, April 24, 2016

Seeking Alpha: Even After A Strong Run, Valeo Not Getting Its Full Due

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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