2024-02-06 12:31:25 ET
Summary
- Short-term results are down, but long-term tailwinds remain.
- Softening demand is expected to pick up again in upcoming quarters, as we come down from record sales.
- The bicycle components market is expected to grow faster than the general economy, which could make Shimano an outperforming company.
- Shimano remains a strong moated company with big scale and network economies.
- Valuation still looks attractive as EV/EBIT is around 12 and stock is being bought back with strong cash reserves.
Thesis
A while ago, I published my first article on Shimano (SHMDF) (SMNNY), in which I stressed its strong financial position and market-presence. Since then, the stock prices has remained stable, while the S&P 500 has outperformed it by over 8%. Has this changed the thesis for this big moat company? I think the answer should be a resounding no. Since my article was published another round of share buybacks has taken place and structurally nothing has changed for the company. The most recent financial results are weak due to short-term headwinds, but long-term tailwinds remain. In this article, I further hone in on the thesis from my last article....
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For further details see:
Shimano: Short-Term Pain For Long-Term Gain