ACCO - ACCO Brands: Has New Management Found The Fire Extinguishers?
2024-05-12 20:07:32 ET
Summary
- ACCO Brands has historically been undervalued due to poor acquisitions and wasteful spending, leading to declining shareholder value.
- The departure of CEO Boris Elisman marks a shift in management and a renewed focus on debt reduction and organic growth.
- If management follows through on debt reduction goals, ACCO presents an opportunity for investors with a potential 20-40% increase in share price within the next two years.
ACCO Brands ( ACCO ) is a manufacturer of consumer products largely focused on office and school environments, as well as certain electronic products which serve those markets and extend beyond into gaming. ACCO’s primary historical feature from an investment standpoint is as a perpetual value stock – regardless of cash flows and earnings, the company’s shares have always been cheap from an objective standpoint. We’ve previously argued that a key factor for this perpetually low valuation was the company’s longstanding track record of wasting shareholder assets on questionable acquisitions which ultimately yielded little in terms of revenue, profitability, or intrinsic value.
Indeed, our last article on the company – in June 2021 – expressed our view that management was uniquely capable of wasting the company’s cash flows on poor acquisitions that had generated no significant benefits for shareholders despite hundreds of millions in acquisition costs. The article was met with a handful of comments from more optimistic investors, less skeptical of the company’s prospects – including one bold prediction that the shares would trade up to $12.00 to $15.00 by the end of 2022 while shareholders were “paid to wait.” We were skeptical of the expectation, based on our view that there was little reason to expect a valuation reassessment without fundamental change at the company. Indeed, not only did a rebound in share price fail to materialize – the shares traded essentially flat for the balance of the year before embarking on a steady decline throughout 2023 – but we also suspect that the interim dividends were of little consolation....
ACCO Brands: Has New Management Found The Fire Extinguishers?