By Jeff Sanford
Boucherville, Quebec -- August 24, 2015 -- Not bad for a Canadian company in a niche sector. It seems Quebec parts distributor Uni-Select is developing a bit of a reputation as a bit of a stock market star.
Most recently the company featured in a story that ran on the Bloomberg news wires (and was reprinted in the Globe and Mail).
The writer singled Uni-Select out as a big performer this year. This is for good reason. As the writer points out, stock in the company has more than doubled this year. But what’s better, it looks like the stock could go higher. As the story points out, even though the stock has appreciated smartly over the past several months, stock in Uni-Select is still relatively cheap when considered from the point of view of the most common metric used by stock analysts.
The most fundamental metric that analysts use when valuing a stock is a ratio, price to earnings. Analysts, by dividng the price of a stock by the earnings being generated by the company can come up with a number that allows companies across differing industries to be compared. A lower “P/E ratio” means a stock is undervalued as compared to the broad market. Higher P/E ratioes mean the stock is relatively expensive. According to the Bloomberg report Uni-Select has the lowest P/E ratio among eleven other “peer” stocks. That is, Uni-Select stock is a heck of a bargain. Even after the doubling in price this year.
The company recently sold its US auto-parts distribution to famed US investor Carl Icahn. That deal brought in $340 million to Uni-Select, money that was used to pay down debt. The company has also shaken up the management team and just made way for a new CEO, Henry Buckely, who took the reins on August 1, 2015.
The Bloomberg report quoted some bullish statements about the company from the principal of Toronto-based investment house, I.A. Michael Investment Counsel, Irwin Michael: “With a clean balance sheet, Mr. Buckley has a lot of opportunities to put his stamp on the company and make proper acquisitions. He can guide the company in a new direction with a fair amount of energy.” Michael’s firm has put its money where its mouth is: The company owns 315,000 shares of Uni-Select. The idea that Uni-Select is ready to get to work on some acquisitions seems a solid assumption.
Indeed, Buckley has already got to work: This week Uni-Select acquired Nova Scotia-based company, C.B. Hoare Auto Parts. Earlier in the month it bought Colorado assets of Painters Supply Co. Terms weren’t made public.
As it is, shares in Uni-Select trade at a price-earnings ratio of 12 as of Wednesday. The average of companies in this sector is 23. So there is a solid argument that the stock of Uni-Select is undervalued. The company still has $78-million of cash on hand, no debt and access to credit facilities of $420-million. That is, the company is perfectly situated to engage in some serious mergers and acquisitions in the months to come. With such an affordable stock price, it seems Uni-Select is set to become a favourite of Canadian investors who are in the know.
For more information, please visit uniselect.com.