The HollySys (HOLI) story is no less frustrating than it was a quarter ago,
as the company posted mixed fiscal second quarter results, but also
appeared to continue to gain share in China’s process automation market.
Margins may well remain under pressure for some time, as the company
continues to show a willingness to trade margins for market share in
automation and as it continues to reinvest in R&D in both the
automation and rail businesses.
As for the shares,
they continue to look undervalued, with the stock at a five-year low in
terms of price/book and EV/EBITDA. This is a profitable business that
consistently generates solid free cash flow and sports a healthy balance
sheet. Still, it is not particularly well-followed, it’s not
particularly large, and the company’s performance has been erratic (and
communication with investors has been far less than perfect). Investors
attracted to the story and low apparent valuation would do well to at
least be aware of the “value trap” risk here, even though the company is
leveraged to some attractive trends, including a growing emphasis on
self-sufficiency within China’s automation market.
Read more here:
HollySys Gaining Share In Automation, But Volatility, Execution, And Covid-19 Remain Risks
No comments:
Post a Comment