Monday, October 15, 2018

Smiths Group Going Nowhere Fast

It's never fun, but sometimes companies force you to conclude that your prior assumptions were just wrong (or you can take the time-tested bagholder approach of "I'm not wrong, I'm early!"). In the case of Smiths Group (OTCPK:SMGZY) (SMIN.L), I thought earlier this year that management was on the cusp of delivering the sort of results and portfolio transformations that would show a true break from its not-so-charming past trend of weak growth and questionable capital allocation/portfolio management. Since then, I just haven't seen the sort of follow-through I need to see to maintain that optimism.

To be sure, Smiths isn't a disaster, and fiscal 2018 was the first upturn in organic growth in some time. Moreover, there is still some apparent undervaluation based on what I think are fairly undemanding assumptions. If management can get its "stuff" together - drive better margins in John Crane, turn around or sell Medical, improve Detection, and lay out a more coherent strategic portfolio plan - there's still room for this stock to do better. But in the short term, I believe the disappointments of the past few weeks and months will continue to weigh on sentiment and valuation.

Read more here:
Smiths Group Going Nowhere Fast

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