equitieswatch
Tuesday, September 26, 2023
About us
Advertise
  • Home
  • Stock Market
  • Finance
  • Cryptocurrency
  • Commodities
No Result
View All Result
Equitieswatch.com
No Result
View All Result

This Company’s Doing Everything Right but its Shares Aren’t

by equitieswatch
April 4, 2022
in Stock Market

Companies, and their shareholders, can do everything right and still not be rewarded.

YOU MAY ALSO LIKE

Mexico’s new airport gets boost from Panama’s Copa Airlines By Reuters

Honda and Sony Team Up to Tackle Tesla

But not forever, according to Real Money Columnist Paul Price.

“Griffon (GFF) has done nothing wrong over the past nine years,” Price wrote recently on Real Money. Yet in spite of fine financial performance over that period, “continuous shareholders only made gains that represented a fraction of the true value created. By definition, that can only happen due to price-to-earnings compression.”

The good news is that “situations like that tend to reverse themselves over time, typically rewarding buyers near cheap entry point valuations with outsized gains.”

So, what’s going on here?

Scroll to Continue

Griffon is what’s known as conglomerate, or a holding company. This means that the Griffon corporation itself conducts little or no consumer-facing business. Instead it manages its network of subsidiary companies. These subsidiaries do the revenue-generating business, and the profits of Griffon reflect the strength of its overall network of businesses. In the case of Griffon, its subsidiaries work across industries ranging from home goods to telecommunications.

And Price sees a business that has done very, very well. Over the nine year period that he reviewed, earnings per share grew by 540% and dividends to shareholders more than tripled. Who wouldn’t want to hold that stock?

Apparently a surprising number of investors, because in that same period GFF’s stock price ticked up from $11.83 to $20.56 per share. Price considers this a significant under-valuation for the stock, one which he expects to resolve itself over time.

Shares have seen five notable selloffs in recent years.  “The average decline averaged 42.7% from peak to trough. They took about 4.6-months to play out,” Price noted.

“The four recoveries lasted longer, at around 11.7-months, and ultimately delivered much more powerful gains averaging 138.3%. Clearly every previous major selloff in Griffon presented a great opportunity for buyers at the nadirs to capture more than triple the magnitude of the declines.”

And now, Price writes, we have entered another cycle in which Griffon is selling for much less than he thinks it’s worth.



Source link

ShareTweetPin

Search

No Result
View All Result

Recent News

Oil slips further on demand, financial market worries By Reuters

Oil Sinks Further Amid China Concerns, Weakened Economic Prospects By Investing.com

October 25, 2022
Gold Up, Set for Second Weekly Gain as Dollar Falls from 20-Year High By Investing.com

Gold Pressured Near $1,650, Copper Muted on Economic Fears By Investing.com

October 25, 2022
Explainer-What would be the impact of Russian oil sanctions in Europe? By Reuters

Oil prices edge higher as U.S. dollar eases By Reuters

October 25, 2022
Equitieswatch.com

Equitieswatch.com is your Stock Market, Finance, Forex, Cryptocurrency, Business, NFT News Website. We provide you with the latest breaking news and videos straight from the Business industry.

  • Home
  • About us
  • Contact
  • Privacy Policy

© 2022 www.equitieswatch.com

No Result
View All Result
  • Home
  • Stock Market
  • Finance
  • Cryptocurrency
  • Commodities

© 2022 www.equitieswatch.com