Market's view on Ashtead Technology
Published on April 2024
- Discussion on the relevance of ROIC (Return on Invested Capital) calculation methods and inconsistency in figures based on different accounting formulas.
- There are positive sentiments towards the stock being undervalued and potential growth, expecting a trend towards a higher price point.
- Highlighted Morgan Stanley’s detailed report on ROIC, suggesting significant research interest in the topic.
- There is an analysis of ROIC vs. management’s figure, with detailed breakdowns and concerns about the calculations used.
- ROCE (Return on Capital Employed) and ROOCE (Return on Operating Capital Employed) are discussed, highlighting differences and implications for the company’s profitability and asset valuation.
- Concerns about overvaluation from a valuation metrics perspective, despite strong profitability indicators like ROCE and ROIC.
- Discussion on the effectiveness of different financial metrics and their impact on assessing company performance: P/E ratio, PEG ratio, EV/EBITDA multiple and debt-adjusted P/E ratio.
- Mention of potential share price weakness due to perceived overvaluations despite healthy profitability indicators.
- Interest in the company’s long-term growth potential, pricing power, and ability to fund acquisitions discussed.
- The importance of consistent management performance as indicated by historical ROIC figures and its impact on future investment potential.
- References to various high ROIC companies as examples of successful management and investment opportunities.
- Observations on the company’s acquisition strategy and its impact on financial metrics like goodwill and its overall capital employed.
- Speculation about the company’s ongoing acquisition strategy and potential need for additional cash to fund future growth.