GEA Group - A Credible Self-Improvement Plan, But No Better Than Expected

“So lie to me, but do it with sincerity” Depeche Mode, Lie To Me

Guidance is a funny thing. Nobody wants to be lied to (or at least nobody will say they want to be lied to), but given the short attention spans and short-term focus of most institutional investors, investors often seem to prefer unrealistically high targets from management teams that boost the shares in the short term, with long-term consequences be damned. To that end, GEA Group’s (OTCPK:GEAGY) (G1AG.XE) restructuring plans announced in late September had credible, sober, attainable near-to-medium-term goals, but they didn’t exceed the already-inflated expectations from the sell-side and the lingering sentiment seems to be one of disappointment.

Valuation is tricky here, and I will remind investors that successful turnarounds often exceed initial expectations, but not all turnarounds succeed. If GEA Group does only what is already in the stated plan, the company will still be relatively lackluster compared to its peer group, and the shares are only modestly undervalued (though still undervalued). If, however, GEA Group’s new management team is taking sensible bites and setting achievable goals, with greater long-term potential than is reflected in the 2022 guidance, the shares are worth more serious consideration.

Click here for more:
GEA Group - A Credible Self-Improvement Plan, But No Better Than Expected