It’s certainly true that the stock market is a
discounting mechanism that looks beyond current results in assessing a
company’s value. But it’s also true that investors can get ahead of
themselves, and particularly so with companies they like, and I think
that’s the case at Yaskawa Electric (OTCPK:YASKY)
now. Investors ignored another weak quarter from this leading
automation player, content to assume that the bottom is in sight and
results will soon start to improve from here.
I have
no problem with the overall assumption that Yaskawa is bottoming out.
My problem is that the market is assuming a growth rate from here that’s
just too high (or using a discount rate that’s just too low), and I
struggle to reconcile the likely path of Yaskawa’s earnings and cash
flows with today’s valuation. I don’t like taking a negative stance on
companies I like, and particularly when I do think they’re near a
cyclical low, but I’m struggling to connect the valuation dots on a
company already trading at over 18x FY21 EBITDA and nearly 14x FY22
EBITDA.
Click here for the full article:
The Market Shrugs Off Another Weak Quarter From Yaskawa Electric
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