ALIT - Alight: Time To Buy But Volatility Risks Not Excluded
2024-01-26 11:12:22 ET
Summary
- Alight trades at a significant discount to some of its industry peers.
- Its strategy to rely more on automation can also deliver margin expansion, prompting analysts to revise the EPS upward six times during the last 3 months.
- On top, its restructuring plan can deliver about $100 million of cost savings and offset the effects of uncertainties associated with lower economic growth in 2024.
- There are volatility risks associated with the balance sheet in case the company has to seek financing and interest rates stay higher for longer.
- It is important to first understand the company's approach in such a competitive industry and how it differentiates itself to win market share.
It can be difficult to persevere in the HR (Human Resources) and employment services industry, more commonly known as HCM (Human Capital Management) outsourcing. There is tough competition not only from well-established incumbents like Automatic Data Processing ( ADP ) but also from smaller ones specializing in specific areas of HR. In these circumstances, Alight ( ALIT ) which went public through a SPAC deal in 2021, appears well positioned as it has enjoyed a superior YoY revenue growth grade relative to the sector median as shown below....
Alight: Time To Buy, But Volatility Risks Not Excluded