Sika Flexing Its Strengths, And The Street Has Taken Notice

I’ve said it before, including in reference to Sika (OTCPK:SXYAY, SIK.S), but it bears repeating - low valuation doesn’t make stocks go up and high valuation doesn’t make them go down. While Sika hardly looked cheap when I last updated my thoughts on the company, solid execution through the pandemic, increasing expectations of green building retrofits, growing optimism on margin targets, and increased Street coverage have all contributed to another 40% or so move up in the share price.

I can’t tell you that Sika is cheap by any fundamentals-based approach. I can say, though, that this is an uncommonly well-run company with significant growth opportunities in all of its core markets, as well as meaningful margin leverage potential. With “green building” now a hot secular trend, I don’t think valuation multiples are all that important to the stock for the time being. I do believe “the time being” is a key caveat though; while I do believe that Sika is an excellent company with a great future, I do also believe that valuation matters over the long term, and it’s hard to see how this stock re-rates substantially higher.

 

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Sika Flexing Its Strengths, And The Street Has Taken Notice