Wednesday, July 22, 2020

Assa Abloy: Consistent Historical Execution Versus Uncertain Non-Resi Trends

It's hard to fault Assa Abloy (OTCPK:ASAZY) (ASSA-B.ST) for consistency over the past decade. Organic growth has been steadily positive (a little above 3%), adjusted operating margins have reliably been in the 16%'s, FCF margins have hovered around 10%, and the company has continued to grow its electromechanical lock and automation businesses, while maintaining a market share above its three largest competitors combined.

The problem with that consistency, though, is that it's hard to make a case that the business is going to meaningfully inflect above-trend. I'm sure there will be "rebound growth" after what will be a horrible 2020, but the outlook for non-resi construction isn't so great now, and I'm not really sure there's a strong argument that investments in areas like mobile or touchless access will drive a major change in the business. I do believe that Assa Abloy can achieve mid-single-digit long-term revenue growth and mid-to-high single-digit FCF growth, and I think this is a good stock to own at the right price, but right now it looks like too much is being expected of this steady non-resi play.

Read more here:
Assa Abloy: Consistent Historical Execution Versus Uncertain Non-Resi Trends

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