Profit margin – Stormbirds http://stormbirds.net/ Tue, 27 Sep 2022 18:23:00 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://stormbirds.net/wp-content/uploads/2021/07/icon-2021-07-05T151758.466-150x150.png Profit margin – Stormbirds http://stormbirds.net/ 32 32 Ebix Stock: An Affordable Bet on the Fast-Growing Fintech Industry https://stormbirds.net/ebix-stock-an-affordable-bet-on-the-fast-growing-fintech-industry/ Tue, 27 Sep 2022 18:23:00 +0000 https://stormbirds.net/ebix-stock-an-affordable-bet-on-the-fast-growing-fintech-industry/ Melpomenem If you want to take advantage of the rapid growth $160 billion fintech industry, consider going long on Ebix, Inc. (NASDAQ: EBIX). The -44.80% price drop made EBIX very affordable. It is now trading below $20, well below its 52-week high of $44.42. Looking for Alpha Ebix’s market cap is now below $610 million. […]]]>

Melpomenem

If you want to take advantage of the rapid growth $160 billion fintech industry, consider going long on Ebix, Inc. (NASDAQ: EBIX). The -44.80% price drop made EBIX very affordable. It is now trading below $20, well below its 52-week high of $44.42.

EBIX stock performance chart

Looking for Alpha

Ebix’s market cap is now below $610 million. Just over four years ago, EBIX’s market capitalization was greater than $2.7 billion. Ebix is ​​a fallen angel, he could be a future takeover target for major fintech companies.

Yes, EBIX could be a knife that falls with many tickers. The Dow chart below shows that Ebix’s trading performance may not be the issue. Emotional investors drive the stock market down in general. Even the largest fintech company, Visa (V), is showing a six-month price return of -18.21%.

dow chart bear market 2022

CNBC.com

Don’t be intimidated by big dips

Thanks to the universal fear and panic in the stock market, EBIX could be bought at just 7.12x the forward P/E. The opportunity here can be illuminated by carefully studying the table below.

ebix relative undervaluation

Looking for Alpha Premium

EBIX is a perfect value play as its forward valuation is 65% below the average of its industry peers. The TTM Price/Sales valuation of software solutions provider Ebix is ​​just 0.61, 77% below the average of its peers.

I think the significant undervaluation of EBIX is unfair. The net profit margin of this company is 6.97%, which is 66.7% higher than its industry peers. Ebix Inc. is consistently profitable since 2010. Consistent profitability in a highly competitive and crowded industry should be rewarded.

EBIX is a consistently profitable chart

Looking for Alpha Premium

The negativity on EBIX could be because its 5-year net income margin was 16.84%. What I remember is that fierce competition forces him to engage in a price war to win more customers. Lower fees for its fintech software solutions are underscored by Ebix’s 31% TTM gross profit margin. This is again significantly below its 5-year average of 54.27%. These lower margins are forgivable. Sacrificing gross/net margins to gain or protect market share is a valid business tactic in my opinion.

Ebix is ​​a small fish in competition with giants like Visa or PayPal (PYPL). Lower prices are an easy way for Ebix to attract customers away from its much larger competitors. Additionally, growth-oriented investors likely know that smaller companies have greater growth potential than companies like Visa. Therefore, Ebix outperforming the growth rates of its bigger rivals should attract more bulls.

Too many business segments is not ideal

Ebix’s hugely diverse software solutions are confusing. A small company that dips into so many pies probably isn’t very appealing to defensive investors. However, I think this company’s varied services and partners mean its growth is almost assured.

ebix array of its many business channels

ebix.com

Ebix could probably go back to posting a revenue CAGR above 15% if only management started to focus on its most promising channels. My decades as an independent multimedia artist have taught me that focusing on 2 or 3 markets is the best way to make money.

EBIX has a 5-year median revenue CAGR of 25.39%. Unfortunately, it is only 9.07%, less than Visa’s 24% and PayPal’s 10.66%. The fault with the star of EBIX could be too diversified a range of products. This company was founded in 1976 and yet it never became a $5 billion company. This can be partly blamed on too many business segments in my opinion.

ebix businesses and products

ebix.com

The R&D and marketing costs of so many services/solutions could also be the reason for its low gross margin of 31%. A laser focus on insurance and financing channels is desirable. There is no urgent need for this travel solution and education channels. I think they should be sold to strengthen the insurance, finance and advisory channels.

On the other hand, having so many business segments could also be the reason why it continues to survive. My takeaway is that a streamlined product portfolio could increase Ebix’s market share in the fintech space. The 20.3% CAGR of this particular business could continue to attract large companies and startups.

Global fintech market size and forecast

Allied Market Research

EbixCash is very promising

My favorite reason to endorse this stock is EbixCash. Low digital transaction/remittance fees end up adding up to a substantial amount. EbixCash only needs to attract a sufficient number of customers.

EbixCash is tall in India. This is very important because India knows exponential growth in fintech services. India’s fintech technology services market is estimated to generate $200 billion in revenue and $1 trillion in assets under management (assets under management by 2030).

ebixcash is big in india

ebixcash.com

These 650,000 outlets in India make EbixCash a very important player in local and cross-border remittances and digital payments in India. India remains the leading country in the world in terms of international remittances received. It received 89 billion in incoming money transfers.

Ebix Payment Services Pvt. Ltd is the money transfer technology partner of Western Union (WU), MoneyGram (MGI), Ria Money, Transfast and Xpress Money. Ebix is ​​also the incoming money transfer technology animator for all aforementioned partners in other countries.

Conclusion

EBIX is significantly undervalued compared to its industry peers. Bargain hunters looking for growth stocks should consider EBIX. My reservation against Ebix’s many business channels does not detract from my belief that this is a worthy bet on fintech.

Technical indicators indicate that EBIX is heading towards more dips. Better to wait and let go before going long.

Ebix Inc. has a Piotroski score of 5, so it could be a safe long-term investment. Shares of this company could rebound next year if they post a double-digit revenue growth rate. Going forward, Ebix will still have the handicap of lower gross margins compared to giants like PYPL and V. Its small size means it has to use lower prices to retain and attract customers.

ebix is ​​a safe investment

Finbox.io Premium

Going long on EBIX while it is trading below $20 could prove very profitable. Ebix’s huge presence in India and its low valuation make it a very attractive takeover price. PayPal has $9.31 billion in cash. It can afford to offer $1.5 or $2 billion to acquire 100% of Ebix Inc. Even at a price of $2 billion, PayPal would only pay at a 2x P/S valuation. Adobe (ADBE) buys Figma at a valuation of 50x P/S.

]]>
Better Buy: GoPro vs. Matterport https://stormbirds.net/better-buy-gopro-vs-matterport/ Sun, 25 Sep 2022 14:14:00 +0000 https://stormbirds.net/better-buy-gopro-vs-matterport/ GoPro (GPRO -1.76%) and Matterport (MTTR -1.84%) both have carved niches in the commoditized camera market with their unique products and services. GoPro’s action cameras allow users to record a wide variety of activity and backs up all that content to its cloud-based platform. Matterport’s 3D scanning cameras enable businesses to digitize “digital twins” of […]]]>

GoPro (GPRO -1.76%) and Matterport (MTTR -1.84%) both have carved niches in the commoditized camera market with their unique products and services. GoPro’s action cameras allow users to record a wide variety of activity and backs up all that content to its cloud-based platform.

Matterport’s 3D scanning cameras enable businesses to digitize “digital twins” of physical environments for online tours or virtual reality applications. Like GoPro, Matterport stores this content on its own cloud-based platform.

Image source: Getty Images.

Shares of GoPro hit an all-time high of $93.85 nearly eight years ago, but now trade at around $5 a share. Matterport’s stock closed at an all-time high of $33.05 last November, but is now trading below $4. Let’s take a look at what happened to these two innovative camera makers, and if either of the downed stocks are ready for a long-term rebound.

GoPro has learned painful lessons

When GoPro went public in 2014, its action cameras were flying off the shelves. But over the next few years, its camera sales plummeted for three reasons: cheaper competitors entered the market, smartphone cameras got better, and its top users didn’t upgrade from their old ones. cameras.

Between 2015 and 2019, GoPro’s annual revenue grew from $1.62 billion to $1.19 billion. Its annual shipments fell from 6.6 million to 4.3 million during this period, while its gross margin fell from 42% to 35%.

As GoPro’s sales dwindled, it diversified into cheaper cameras, VR camera rigs and drones. But those devices only slashed his margins without increasing his sales, so he eventually ditched those products and instead focused on his flagship Hero cameras and 360-degree Max cameras. It has also tried to attract more users by expanding its subscription service, which offers unlimited cloud storage, free camera replacements and exclusive discounts of $50 per year.

GoPro’s revenue fell 25% to $892 million in 2020 as more people stayed home during the pandemic, but its gross margin remained flat at 35%. In 2021, its revenue jumped 30% to $1.16 billion as those headwinds faded, and its gross margin rose to 41%. It also generated a net profit of $371 million, compared to a net loss of $67 million in 2020. Its subscriber count also more than doubled to 1.6 million for the full year.

This post-pandemic recovery was encouraging, but analysts expect GoPro’s revenue to rise just 2% to $1.19 billion this year, as its net income drops 78% to 82 millions of dollars. This slowdown can be attributed to the impact of inflation on discretionary buying and tougher competition. In August, it forecast it would ship only 2.9 million to 3.1 million camera units in 2022, down from 3.15 million in 2021 and its previous target of 3.2 million.

Matterport faces an existential crisis

Matterport went public by merging with a SPAC (Special Purpose Acquisition Company) last July. But like many other SPAC-backed companies, Matterport has overpromised and underdelivered.

In its pre-merger presentation, Matterport predicted that its annual revenue would grow from $46 million in 2019 to $123 million in 2021 and then grow 65% to $203 million in 2022. However, its revenue only reached $112 million in 2021, and it only expects 19% to 24% growth to reach $132 million to $138 million this year, and that only after taking into account counts its recent acquisition of real estate marketing company VHT Studios. Prior to this purchase, Matterport expected revenue to grow 12% to 21% for the full year. It mainly blamed the slowdown on disruptions in the supply chain of its camera business.

However, Matterport’s subscription-based cloud platform, which generated 62% of its revenue in the first half of 2022, is also not as big as it looks. Matterport said it served 616,000 “subscribers” in its last quarter, but 554,000 of those subscribers were still using its free plan, which grants remote access to a single digital twin. It only generated revenue from the 62,000 subscribers who paid for storing additional digital models.

This high mix of free users increases Matterport’s cloud hosting fees without increasing its revenue. This pressure, along with its sluggish sales of low-margin cameras, caused its gross margin to drop 20 percentage points year-over-year to 41% in the first half of 2022. Matterport initially told investors that its margin crude could approach 60% in 2022. .

Matterport believes it can resolve the camera industry’s supply chain issues in the second half of 2022, but further macro headwinds could dampen market demand for digital twins of physical properties. Other larger competitors, including Adobe and Unity — have also expanded into the digital twin market. As a result, analysts expect the company to remain deeply unprofitable for the foreseeable future.

GoPro is clearly the best buy

GoPro is trading at just five times forward earnings and less than one times sales this year. Matterport is still trading at eight times this year’s sales. I wouldn’t rush to buy either of these stocks out of favor right now. But if I had to choose one, I would definitely buy GoPro because its growth rates are more stable, its ecosystem is stickier, and its stock is much cheaper.

Leo Sun has positions in Adobe Inc. and Unity Software Inc. The Motley Fool has positions in and recommends Adobe Inc., Matterport, Inc. and Unity Software Inc. The Motley Fool recommends the following options: long January 2024 $420 calls on Adobe Inc. and short $430 calls in January 2024 on Adobe Inc. The Motley Fool has a Disclosure Policy.

]]>
Guidewire Software: Sell as Part of Buyout (NYSE: GWRE) https://stormbirds.net/guidewire-software-sell-as-part-of-buyout-nyse-gwre/ Fri, 23 Sep 2022 17:41:00 +0000 https://stormbirds.net/guidewire-software-sell-as-part-of-buyout-nyse-gwre/ ipopba Introduction As interest rates rise and the tide of easy money recedes, companies that have grown at any cost are taking it on the chin. The era of profitless prosperity is coming to an end. Over the past few months, I have emphasized a number of them, We work (WE) at GitLab (GTLB). Corporate […]]]>

ipopba

Introduction

As interest rates rise and the tide of easy money recedes, companies that have grown at any cost are taking it on the chin. The era of profitless prosperity is coming to an end. Over the past few months, I have emphasized a number of them, We work (WE) at GitLab (GTLB).

Corporate management facing a halving in their stock price and a restless workforce watching their holdings decline in value have a choice. They can focus on profitability by reducing costs and showing the market that they are actually delivering economic value to their customers. Or they can use the cash balance they’ve accumulated during the good times to do a bit of financial engineering and buy back their shares. Alas, the latter is only a temporary solution. At some point, the cash balance will be exhausted and the focus will once again be on profits. This is the path that Guidewire Software (NYSE: GWRE) chose, with the announcement of a $400 million share buyback.

Usually when a company announces a takeover it is an opportunity to buy the stock because you know the company will be a buyer for some time. In this case, I think a contrarian approach of selling or shorting the stock will pay dividends (although I’m pretty sure the company won’t).

Company history

Based in San Mateo, Calif., Guidewire develops software products for P&C insurers. The company also provides implementation and related professional services. The company is trying to move to a subscription model from selling licenses. It has not been profitable for the past three years, with losses increasing every year. The stock has fallen more than 40% in the past year, compared to a 15% decline in the S&P 500.

Financial overview

For the most recent quarter ending July 31, 2022, the company generated $245 million in revenue, up 7% year-on-year. Operating profit was a loss of $32 million (-13% operating margin) and net profit was a loss of $31 million or $0.37 per share. This quarter also marked the end of its fiscal year and the company recorded revenue of $813 million, up 9% year-on-year. Operating profit was a loss of $199 million (-24% operating margin) and net profit was a loss of $180 million or $2.16 per share.

The company currently holds 84 million shares and a market capitalization of $5.1 billion. It has $358 million in debt and $1.16 billion in cash for net cash of $0.8 billion. It thus has an enterprise value of 4.3 billion dollars, or 4.6 times its annual turnover.

Analysts expect the company continue to grow at a rate of 10%, with its losses maintained. The company’s forecast is around $900 million in revenue for the coming year. The company has not offered a path to profitability under GAAP.

Valuation and recommendation

Consistent with the conservative way I evaluate loss-making businesses, I assume Guidewire will eventually become profitable. I’m modeling an operating margin of 10%, compared to -24% in its last fiscal year. An important point is that I am not ignorant of equity compensation. If you don’t think this is a real expense, you can stop reading now! Most management teams still have their heads in the sand thinking that they can reward their employees with as many shares as they want without adverse effects. This presents an opportunity for bearish investors, as employees will constantly sell their stocks.

A 10% margin on $900 million in annual revenue would mean an annualized profit of $90 million per year. I value the company at a multiple of 28x on that earnings. I believe that is reasonable. A high-quality company like Microsoft (MSFT) with a similar growth rate is trading at 24 times this year’s EPS. I don’t apply tax rates to profits to be conservative because the company has an accumulated deficit of $284 million which can protect profits for a few years.

So I value the business at $2.5 billion and add net cash back for a total net worth of $3.3 billion. The split by 84 million shares gives a fair value of $39 for the stock, against its current price of $61, for a decline of 35%. I recommend selling or shorting the stock. You can also choose to sell call options or buy put options instead. I think most of this decline will happen over time as employees continue to sell their shares and no new money will enter the market.

Short interest and cost of borrowing

It would be dangerous to short a stock that already has high short interest, with the possibility of a short squeeze driving the price much higher. Nor would it be profitable to pay a high cost of borrowing that potentially absorbs all the downside on the equity side. GTLB has little short interest in 5% of outstanding shares.

GWRE shares are easy to borrow with minimal borrowing cost. Depending on your agreement with your broker, you may get a short discount for the funds generated from the sale of the stocks you borrow (usually a discount of 50 to 100 basis points from the Fed Funds rate, currently at 3- 3.25%). So you could earn 2% per year on any short product.

External ratings

Seeking Alpha’s AI warns that GWRE is at high risk of performing poorly based on its quantitative ratings. It has a composite rating of 1.64, which equates to a sell. Unsurprisingly, Wall Street analysts are more positive, with a combined rating of 3.6, between a hold and a buy. Their price targets have followed the stock price lower.

The risks are high but manageable

Shorting stocks is inherently risky, since the potential losses are theoretically infinite. I would recommend having a short portfolio only in conjunction with long positions. You can reduce the risk somewhat by selling put options against short positions, at around 20% below the current price, generating income, but capping profits.

If investors fell in love with a company, there could be a short squeeze. However, with the money crunch, I would consider the chances of this happening on an extended basis not very high. The company would also likely issue shares in such a scenario. However, if it issues shares at an inflated value, it increases the intrinsic value of the company.

The company could be acquired at a premium by another company or a private equity fund. This is a risk that can be diversified by holding a large number of short positions, each of which is small. With a market capitalization of $5 billion, an acquisition here is certainly doable.

The gap between the company’s intrinsic value and the stock price could widen over time.

The company could boost its stock price by buying back its shares. However, I believe this will only be temporary as he will buy his shares above their intrinsic value.

Preventive disclosure

Writing a short thesis on an action on a public forum is an invitation to blowback for employees and holders of the action. I welcome respectful comments from eponymous readers. If you are a shareholder or an employee, it is better to direct your energies towards the profitability of your company.

]]>
Daily Brief China: Shandong Fengxiang, Angelalign Technology, Leapmotor, SKYX Platforms, Central China Real Estate, Jupiter Wellness, CIFI Holdings, Air China Ltd (H), Bruush Oral Care and more https://stormbirds.net/daily-brief-china-shandong-fengxiang-angelalign-technology-leapmotor-skyx-platforms-central-china-real-estate-jupiter-wellness-cifi-holdings-air-china-ltd-h-bruush-oral-care-and-more/ Thu, 22 Sep 2022 02:04:52 +0000 https://stormbirds.net/daily-brief-china-shandong-fengxiang-angelalign-technology-leapmotor-skyx-platforms-central-china-real-estate-jupiter-wellness-cifi-holdings-air-china-ltd-h-bruush-oral-care-and-more/ We rate Central China Real Estate (CCRE) as “high risk” on the LARA scale. The company’s activities are geographically concentrated in Henan, the third most populous province in China. While this exposes CEMR to political and policy changes within the province, we believe the risks are partly mitigated by the firm’s in-depth market knowledge, brand […]]]>

We rate Central China Real Estate (CCRE) as “high risk” on the LARA scale. The company’s activities are geographically concentrated in Henan, the third most populous province in China. While this exposes CEMR to political and policy changes within the province, we believe the risks are partly mitigated by the firm’s in-depth market knowledge, brand recognition, as well as long-standing relationships. with local government and construction companies. Our view also takes into account the deteriorating operating and financing environment in the Chinese real estate industry, which has had a negative impact on CEMR and other private developers.

Our fundamental credit bias on CCRE is “negative”, given the company’s low sales, very low margins, poor liquidity and lack of access to capital market funding amid the turmoil of the sector. In addition, CEMR has significant non-debt liabilities. Going forward, the company’s debt repayment prospects may depend on developing synergies with its minority investor SOE (Henan Railway) to realize new business and financing opportunities.

Controversies for CEMR are “immaterial”, despite the reputational risk due to worker deaths. This was mostly reported in the media in 2019 and 2020, with these statistics not provided in the company’s ESG reports. The ESG impact on credit is “neutral”. We note positively that CEMR’s corporate governance has improved, supported by increased transparency and its willingness to honor debt obligations.

]]>
Ennis Increases Sales, Earnings and Profit Margin in Q2 2022 https://stormbirds.net/ennis-increases-sales-earnings-and-profit-margin-in-q2-2022/ Mon, 19 Sep 2022 17:48:05 +0000 https://stormbirds.net/ennis-increases-sales-earnings-and-profit-margin-in-q2-2022/ Gains continue for Ennis Inc. (asi/52493). The Midlothian, Texas-based printing and promotional products provider just reported year-over-year increases in sales, earnings and profit margin during its fiscal second quarter, which s ended August 31. Keith Walters, Ennis Ennis, a publicly traded company, said total revenue for all business divisions was […]]]>

Gains continue for Ennis Inc. (asi/52493).

The Midlothian, Texas-based printing and promotional products provider just reported year-over-year increases in sales, earnings and profit margin during its fiscal second quarter, which s ended August 31.

Keith Walters, Ennis

Ennis, a publicly traded company, said total revenue for all business divisions was $111.2 million, an increase of 10.6% from the second quarter a year earlier.

Net income reached $12.19 million, compared to approximately $7.5 million in the second quarter of 2021. This translated into diluted earnings per share of $0.47, a jump of 62% from one year to the next. Gross profit margin also increased to 31.7% from 28.8% in the prior year period.

For the first six months of its fiscal year, Ennis’ net income rose 61% on a comparative basis to $23.82 million. Half-year total sales also improved, rising 11% to $218.9 million.

“Customer demand for our products continues to be strong, as evidenced by revenue increases over the past several quarters,” said Keith Walters, CEO, Chairman and President of Ennis.

Walters continued, “We believe we have one of the strongest balance sheets in the industry, with no debt and plenty of cash. Our profitability and solid financial position will allow us to continue our activities and finance acquisitions without incurring debt. Given these strengths, we also anticipate quick access to credit should larger acquisition opportunities materialize as we continue to explore strategic opportunities in the area of ​​acquisitions to increase profitability.

In April, Ennis announced it had increased total revenue, net income and company profit for its previous full fiscal year, which ended February 28, 2022.

Ennis sells promotional products, business forms and supplies, software compatible checks and forms, envelopes, custom business forms, presentation folders and more. The company was previously one of the top 40 suppliers.






]]>
3 stocks to buy in a recession https://stormbirds.net/3-stocks-to-buy-in-a-recession/ Sat, 17 Sep 2022 15:08:00 +0000 https://stormbirds.net/3-stocks-to-buy-in-a-recession/ There are many ways to invest in a recession. So let’s discuss three different ways and suggest three actions, along with alternatives for investors. The three titles watsco (BSM -0.85%), Corteva (VAT -1.24%)and Cognex (CGNX 0.88%)have nothing in common, but they all represent investment themes that could work in a downturn. Three ways to invest […]]]>

There are many ways to invest in a recession. So let’s discuss three different ways and suggest three actions, along with alternatives for investors. The three titles watsco (BSM -0.85%), Corteva (VAT -1.24%)and Cognex (CGNX 0.88%)have nothing in common, but they all represent investment themes that could work in a downturn.

Three ways to invest in a recession

There’s no surefire way to invest in a recession, but here are some solid options:

  • Stocks with strong balance sheets and the ability to improve long-term prospects during a recession, such as Watsco and Honeywell International.
  • Stocks whose end markets are not necessarily affected by the direction of the economy. One example is the agricultural sector, with companies like Corteva, Deereand FCM.
  • Long-term growth stocks that are battered during a recession, providing investors with an opportunistic entry point. There are many options here including Cognex, CTPand fortified.

1. Watco

The heating, ventilation, air conditioning and refrigeration (HVACR) parts distributor’s incredible success story over the past two decades comes down to its “buy and build” strategy. His activity is relatively simple but very successful. Service contractors come in to repair/maintain HVACR equipment and order parts from a distributor like Watsco.

The company has grown by consolidating a highly fragmented market characterized by companies operating in local markets. Through an ongoing series of acquisitions, Watsco has grown geographically and expanded its product line. As acquired companies operate locally, there is little cannibalization. Plus, being part of the Watsco network helps them operate more efficiently, with access to more parts and Watsco’s digital platforms (e-commerce enabled websites, etc.).

The key to his “buy in a recession” argument is that any economic weakness can encourage smaller distributors to sell. Given Watsco’s strong balance sheet and market-leading position, the company is uniquely positioned to capitalize on it.

Data by Y-Charts

2. Corteva

The agricultural sector tends to march to the beat of its own drum. Earnings from stocks in the sector are not dependent on the direction of the economy – a good quality in a recession. As you can see below, the price volatility of major crops like wheat, soybeans and corn over the years does not really reflect the volatility of the global economy.

Table of farm gate prices for wheat in the United States

Data by Y-Charts

In this line of thinking, buying stock in seed and crop protection company Corteva makes sense. The company is attractive because management has an opportunity for significant margin expansion by cutting costs and selling more products with its own technology rather than paying costly royalties to other companies for complementary products (e.g. example, another company’s herbicide alongside Corteva’s herbicide resistant seeds).

So far, so far so good on that front, with its own Enlist system (crop protection and seeds resistant to said crop protection) planted on 45% of soybean acres in the United States in 2022. That gives Wall Street the confidence to predict a strong recovery. profit margin in the years to come, and Corteva has a lot of long-term earnings potential.

3.Cognex Corporation

Not much has gone right for machine vision company Cognex in 2022. However, faced with significant supply chain issues and component shortages during the year, management made the conscious decision to invest (at the expense of profit margins) to deliver products to customers. It’s a good thing to do for a company establishing its technology with important customers like Apple (and eventually Amazon).

However, that’s where the good news ends, as its top three end markets, logistics (e-commerce warehousing), consumer electronics, and automotive, have all suffered this year. After a few years of scorching growth, e-commerce companies are cutting investment, while consumer electronics and automotive production will be weaker than expected at the start of the year due to a slowdown in consumer spending and problems supply chain persistence. Start a fire at its main contractor (damaging Cognex inventory), and it’s been a year to forget.

Unsurprisingly, Cognex stock is down 43% in 2022 and 50% last year, and if a recession hits, it could drop even further. However, nothing has really changed in its long-term growth prospects, so if you’re ready to buy a stock and ride out potential short-term volatility, then Cognex is attractive. Additionally, the company is building strong relationships with leading companies, which will likely lead to greater adoption of machine vision technology.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Lee Samaha holds positions at Honeywell International. The Motley Fool holds positions and recommends Amazon, Apple, Cognex and Watsco. The Motley Fool recommends PTC and recommends the following options: $120 Long Calls in March 2023 on Apple and $130 Short Calls in March 2023 on Apple. The Motley Fool has a disclosure policy.

]]>
Sobeys boss hits back at criticism of grocery store profits amid inflation https://stormbirds.net/sobeys-boss-hits-back-at-criticism-of-grocery-store-profits-amid-inflation/ Thu, 15 Sep 2022 17:59:50 +0000 https://stormbirds.net/sobeys-boss-hits-back-at-criticism-of-grocery-store-profits-amid-inflation/ Breadcrumb Links New Company “Frankly, I’m sick of these armchair quarterbacks” Publication date : Sep 15, 2022 • 17 minutes ago • 4 minute read • Join the conversation Empire CEO Michael Medline has hit back at critics who suggest Canada’s big grocers are exploiting their market power to profit from inflation. Photo by Postmedia […]]]>

“Frankly, I’m sick of these armchair quarterbacks”

Content of the article

The head of Canada’s second-largest grocery chain called suggestions that the country’s big grocers are using their market power to profit from inflation as “reckless” and “inflammatory,” and called the critics who make such lazy “armchair quarterback” claims who know little. on the food trade.

Advertisement 2

Content of the article

Michael Medline, chief executive of Empire Co. Ltd., which operates 1,600 stores under the Sobeys, Safeway, FreshCo, IGA and Farm Boy banners, made unusually impassioned remarks at his company’s annual general meeting on Thursday. Formerly Empire based in Stellarton, Nova Scotia reported net profit of $187.5 million in its latest quarter, little change from a year earlier.

Content of the article

“Quite frankly, I’m tired of these armchair quarterbacks who make little effort to understand even the basics of our business, but are comfortable sitting on the sidelines pontificating about how companies are reaping unreasonable profits on the back of inflation,” Medline told the assembled shareholders. at a movie theater in New Glasgow, N.S.

Advertisement 3

Content of the article

“That is absolutely not true,” he continued. “These reckless and inflammatory attacks are meant to divide us and stand in stark contrast to the collaboration and problem-solving we have experienced in the darkest times of the pandemic.”

Medline’s remarks represent the most aggressive attempt ever by anyone in the grocery industry to fend off a summer of bad press that has stoked resentment among customers and threatens to draw the attention of politicians who have demonstrated a new interest in competition policy.

Canada’s big grocers have faced a backlash in recent months for posting profit gains as shoppers faced the highest grocery inflation since the 1980s. Empire and its main rivals in the industry – Loblaw Companies Ltd. and Metro Inc. – all dismissed the criticisms as unsubstantiated and misguided. That didn’t stop the swirling accusations of corporate greed from turning into a PR headache for the industry, which had only just gotten rid of the Hero Pay Scandal of 2020 – not to mention an ongoing federal investigation into an alleged scheme to fix the price of bread and a long government campaign to prevent grocers from intimidating their suppliers.

Advertisement 4

Content of the article

David Macdonald, economist at the Canadian Center for Policy Alternatives, said writing that excess corporate profits and higher margins in the food sector were driving up inflation. A Toronto Star Investigation published in July came to a similar conclusion. And last month, the Financial Post worked with accounting and auditing experts to analyze the financial statements of the three major grocers and discovered a more complicated picture than the one drawn by Macdonald and the Star.

The scrutiny was fueled by “a handful of politicians, media sources and think tanks — not because we are struggling, but for being too successful in this difficult environment of high inflation,” Medline told shareholders. “I guess that makes easy headlines and ignores what’s really driving our success,” he added. “I refuse to apologize for our success.”

Advertisement 5

Content of the article

Empire previously said its margin and earnings were improving, thanks in part to its three-year Project Horizon strategy to grow its FreshCo and Farm Boy brands, while using e-commerce and analytics to drive earnings growth.

In an earnings update ahead of the annual meeting, Empire said profits actually fell slightly in the first quarter, despite an increase in sales.

Sales for the quarter ended August 6 increased by 4.1% compared to the same period last year. The jump came from higher food and fuel sales, which have been impacted by soaring commodity prices this year, as well as FreshCo’s expansion into Western Canada, the company said.

Discount stores such as FreshCo have diverted sales from more conventional grocers this year as more shoppers seek bargains as household food bills rise. In his last consumer price index last month, Statistics Canada found that grocery store prices rose 9.9% year over year in July.

Advertising 6

Content of the article

But Empire’s profit was $187.5 million, down $1 million or 0.5% from a year ago. Earnings per share were 71 cents in the quarter, lower than forecast 74 cents, but one cent higher than a year earlier. RBC analyst Irene Nattel said the results were “strong”, despite Empire failing to meet EPS expectations.

The company posted a slightly lower margin in the quarter, which it attributed in part to higher supply chain costs. Empire’s gross margin – a measure of the profit the chain left after factoring in the cost of buying merchandise and running stores – fell to 24.9% from 25.1% last year . The company said its gross margin would be 63 basis points higher than a year ago were it not for the impact of fuel sales.

• Email: jedmiston@nationalpost.com | Twitter:

comments

Postmedia is committed to maintaining a lively yet civil discussion forum and encourages all readers to share their views on our articles. Comments can take up to an hour to be moderated before appearing on the site. We ask that you keep your comments relevant and respectful. We have enabled email notifications. You will now receive an email if you receive a reply to your comment, if there is an update to a comment thread you follow, or if a user follows you comments. Visit our Community Rules for more information and details on how to adjust your E-mail settings.

]]>
For FMCG cos, all eyes on demand recovery https://stormbirds.net/for-fmcg-cos-all-eyes-on-demand-recovery/ Tue, 13 Sep 2022 17:31:04 +0000 https://stormbirds.net/for-fmcg-cos-all-eyes-on-demand-recovery/ Shares of fast-moving consumer goods (FMCG) companies such as Hindustan Unilever Ltd (HUL), Dabur India Ltd and Nestle India Ltd rose 18-36% from their 52-week lows seen in the first half of CY22. Predictably, the excitement revolves around the improving margin outlook for FMCG companies with lower commodity prices. This should provide some relief, as […]]]>

Shares of fast-moving consumer goods (FMCG) companies such as Hindustan Unilever Ltd (HUL), Dabur India Ltd and Nestle India Ltd rose 18-36% from their 52-week lows seen in the first half of CY22.

Predictably, the excitement revolves around the improving margin outlook for FMCG companies with lower commodity prices. This should provide some relief, as companies have faced severe pressure on their margins in recent quarters due to high input costs. Prices of key commodities such as crude oil and palm oil have fallen around 29% and 55% from their respective highs seen in March. HUL and Godrej Consumer Products Ltd are the main beneficiaries of this slowing trend.

Show full picture

Prize winnings

Gross margins are expected to increase from the third quarter as the current September quarter (Q2FY23) would see the negative impact of high cost inventory. But ultimately, it remains to be seen whether margins reach pre-covid (FY20) levels. “Assuming a normalization of input costs beyond FY23 and a partial reversal of the numerous (but calibrated) price increases, we expect a significant gross margin expansion in FY22-24E, bringing it closer to FY20 levels,” said a report from Nirmal Bang Institutional Equities dated Sept. 8. Gross margin for FMCG companies under Nirmal Bang coverage contracted more than 400 basis points over the course of exercise 20-22.

However, a possible increase in advertising and promotion expenses could weigh on the Ebitda margin. Companies may resort to higher advertising and promotion expenditures to increase volumes. Here, cost control measures would provide comfort. “Increased focus on cost savings and profitability, particularly over the past two years (largely due to multi-year inflationary pressure), has led to a leaner profit and loss account (reduced cost structure ) for the FMCG coverage universe,” Nirmal Bang’s Report said.

That said, all eyes would be on the extent of the recovery in demand in the short to medium term. “On the macroeconomic front, the positives outweigh the negatives with a pick-up in consumer confidence, a good monsoon, steady collections of goods and services taxes and an increase in the kharif minimum support price which is expected to accelerate growth,” said a BNP Paribas Securities India report dated September 8.

Improving demand is crucial for volume growth, which was relatively weaker across all businesses. Against this backdrop, higher product prices drove revenue growth.

The compound annual growth rate of overall FMCG segment three-year revenue in the first quarter of FY23 was 8.3%, a high in seven quarters.

Going forward, volume growth could also be driven by a reversal of price increases given weaker input prices. This trend started to show up in the soap category with the drop in palm oil prices. ITC Ltd has corrected the prices of the Vivel brand to improve its competitive positioning, specifies BNP Paribas. Marico reduced Parachute Coconut Oil prices slightly in light of weak copra prices.

A recovery in rural demand is essential and demand trends during the festival season need to be monitored more closely. A rise in commodity prices could upset the mood of investors. At the same time, with the rising stock prices of FMCG companies, valuations have increased. Shares of HUL and Dabur are trading at nearly 53 times and 44 times estimated earnings for FY24, respectively, according to Bloomberg data. Consumer staples companies are trading at a steep premium to their history, according to the BNP Paribas report.

The main concern would be that demand conditions do not improve sufficiently. However, if the demand environment deteriorates here, the margin improvement the street expects in the second half of FY23 is at risk.

Catch all the trade news, market news, breaking news and latest updates on Live Mint. Download the Mint News app to get daily market updates.

More less

To subscribe to Mint Bulletins

* Enter a valid email

* Thank you for subscribing to our newsletter.

Post your comment

]]>
What the Carmarthenshire Farm did to increase profits by 52% per ewe https://stormbirds.net/what-the-carmarthenshire-farm-did-to-increase-profits-by-52-per-ewe/ Sun, 11 Sep 2022 23:30:17 +0000 https://stormbirds.net/what-the-carmarthenshire-farm-did-to-increase-profits-by-52-per-ewe/ Monitoring ewes and managing their body condition score (BCS) reduced the rate of infertile and aborted ewes by 6.4% in a Welsh flock, increasing the profit margin by 3 £.34 per ewe at £9.65. Farm owner Carine Kidd and farmer Peredur Owen run a flock of mainly Easycare ewes alongside a cattle rearing system at […]]]>

Monitoring ewes and managing their body condition score (BCS) reduced the rate of infertile and aborted ewes by 6.4% in a Welsh flock, increasing the profit margin by 3 £.34 per ewe at £9.65.

Farm owner Carine Kidd and farmer Peredur Owen run a flock of mainly Easycare ewes alongside a cattle rearing system at Glanmynys, a 215ha (531 acre) Farming Connect demonstration farm near Llandovery in Carmarthenshire.

See also: Tips for feeding and managing ewes for successful lambing

Through their work with Farming Connect, they have worked with industry experts, including independent sheep specialist Lesley Stubbings, to improve the performance of their flock of 1,000 breeding ewes and 300 lambs.

Management changes have included transitioning the herd to the Easycare breed, introducing outdoor lambing, reseeding and growing more forage and winter crops.

Share farmer Peredur Owen and farm owner Carine Kidd © Debbie James

The resulting move away from concentrates has reduced annual feed costs by £1.52 per ewe.

Monitoring flock performance, including assessing ewes’ condition at key milestones, has been fundamental to improving profitability.

Farm Facts

  • 215 ha (531 acre) Farming Connect demonstration farm
  • 1,000 Easycare, Aberfield and Welsh ewes and 300 lambs
  • 250 Angus and Wagyu cattle reared under contract
  • 6 ha (15 acres) of rutabagas for wintering
  • 31ha (77 acres) wooded

Management tool

Mrs. Stubbings informed farmers that the ewe condition assessment was a simple and effective management tool to assess the body reserves of ewes before tupping, at sweeping and at weaning.

This process has become even more of a priority this summer as the pasture has come under pressure from extremely dry weather. By intervening now, Ms Stubbings said, dry matter (DM) blankets could be matched to herd performance and farmers could make informed decisions.

“BCS is the only key performance indicator (KPI) anyone can monitor – it has an overriding effect on all other performance factors,” she said.

“If you want a ewe to perform well, you have to keep her at the right BCS all year round.”

One goal that every herd can achieve is to achieve the correct mating condition level in at least 90% of the herd – for lowland breeds this means a condition score of 3-3.5, and for mountain breeds, 2.5-3.

Following the achievement of the BCS target, in combination with better nutrition, the scavenging percentage in the herd at Glanmynys increased by 9%.

Plan for drier summers

To manage the condition of the ewes during a summer of poor grass growth, the leaner ewes in the Glanmynys flock have been sent to pasture with higher covers, while a daily move system is in place for the fitter sheep.

A reseeding program saw the introduction of multi-species grasslands to Glanmynys (see “Reseeding Preparation Tips”). The goal for them is to sustain the farm against drier summers.

They also contributed to the performance of lambs after weaning. “The obvious benefit was growing in the dry summer conditions, which allowed us to wean the lambs earlier,” Owen said.

A 15-acre crop of rutabagas was also planted for grazing from mid-December to late February. The ewes will then be put out to grass from March 1, before lambing from April 1.

Increased profit

Veterinary and medical costs have doubled over the past three years as the company has invested in metabolic profiling and blood sampling to assess trace element levels and also conducts vaccination to prevent herd lameness.

However, thanks to improved efficiency and a move to a low-input, forage-based system, a ewe’s profit margin has increased by 52%, from £6.31 to £9.65.

Early intervention needed for thinner ewes

With a shortage of grass this year, there will likely be a higher percentage of thinner than normal ewes.

Therefore, early intervention is essential, as it takes 6-8 weeks to increase fat coverage by a condition score.

A single condition score is between 10 and 13% of body weight. In a 70 kg ewe, this amounts to 8-9 kg. Therefore, if an ewe is at BCS 2 and needs to be reared at BCS 3.5, she needs to gain 13 kg.

That’s an extra 10 MJ/day above maintenance requirements for 10 weeks – almost the same as a pre-lambing diet, says independent sheep specialist Lesley Stubbings.

“That means a high level of feed for lean ewes with concentrate supplementation plus hay or silage when the grass is short.”

Practical assessment

Ms. Stubbings advises farmers to physically feel the condition of ewes and not rely on visual assessment.

This can be done by manipulating them in the lumbar region, immediately behind the last rib. The amount of eye muscle and the degree of fat coverage over the spinous and transverse processes should be assessed.

Tips for Preparing for Reseeding

According to an industry expert, farmers are being urged to review the way they apply herbicides for grass killing because too many are using it incorrectly.

Francis Dunne of Field Options says a common mistake farmers make is to apply glyphosate when leaf area is insufficient.

“Many farmers use glyphosate inefficiently,” said Mr Dunne, a speaker at the Farming Connect event at Glanmynys. “If there’s not enough leaf area, the turf won’t be able to absorb enough product to kill it.”

A grass cover of approximately 2,500 kg dry matter (DM)/ha is recommended to provide ideal uptake conditions.

Optimal conditions

Dunne advises a 12-month lead time when planning reseeding to ensure conditions are optimal for sowing.

This preparation should include soil sampling to allow for necessary corrections to nutrient status and scheduling of herbicide applications to control perennial weeds prior to final turf destruction.

He recommends growing a break crop before a grass reseeding. “A grass-to-grass reseeding is less reliable, especially in dry conditions, because of the turf and pests associated with old pastures,” he said.

A break crop of rutabagas is grown on 6 ha (15 acres) at Glanmynys; this will provide winter fodder for pregnant ewes.

Soil-seed contact

Dunne said another goal of the reseeding program should be good seed-to-soil contact.

Although several machine options are available to facilitate and speed up the sowing of grass, the result may be less efficient because the seed is in poor contact with the soil.

“You make a lot of your own luck by sowing seeds,” he said.

“It’s a very expensive process, and it’s worth remembering that a good reseeding takes years, but a bad reseeding will have to be replaced within two or three years because it won’t work.”

Cannabis control

Prompt action is recommended to control weeds in young seeds. “A lot of farmers don’t think about weed control until the weeds are too advanced and the control is less effective,” he warned.

Four to five weeks after seeding is usually when weed seedlings are most susceptible to selective herbicides, if intervention is needed.

However, as herbicides were not effective for use on a wide variety of lawns, Mr Dunne said conventional farmers needed to be sure to control weeds before sowing, and possibly also use bed techniques. of stale seed.

]]>
What goes back comes when it comes to for-profit child care https://stormbirds.net/what-goes-back-comes-when-it-comes-to-for-profit-child-care/ Wed, 07 Sep 2022 17:12:46 +0000 https://stormbirds.net/what-goes-back-comes-when-it-comes-to-for-profit-child-care/ As someone who has advocated for universal, high-quality child care for over 40 years, I am struck by the similarity of some of today’s debates to those of the past. We’re still debating what role child care companies should play in a publicly funded child care system, how much profit there is for day care […]]]>

As someone who has advocated for universal, high-quality child care for over 40 years, I am struck by the similarity of some of today’s debates to those of the past. We’re still debating what role child care companies should play in a publicly funded child care system, how much profit there is for day care owners, whether they’re “women women entrepreneurs” and the ethics of big business… box lobbying in favor of profit in healthcare services.

The federal government’s recent commitment to build a pan-Canadian, not-for-profit early learning and child care system, supported by substantial long-term federal funding, has intensified the debate and raised two central questions: first, what should can governments ensure that public funds are not used to subsidize and increase the profit margin of existing for-profit daycares? Second, how does Canada avoid the rapid growth of for-profit care that has occurred in other countries when public funding with few limits was available? These two elements are essential in determining whether a universal, high quality and equitable child care system will become a reality for Canadians.

It should be noted that, thanks in large part to COVID-19, the policy and policy environment for child care in Canada is quite different than it has been in the past, with many more issues . The most recent round of the for-profit child care debate was sparked by the rollout of a long-awaited promise to build a quality child care system across Canada, backed by a funding commitment very important long-term audience.

Child care services across Canada are now eagerly awaiting substantial public funding for the first time. New federal funding transferred to provinces/territories is expected to reach at least $9.2 billion per year by 2025-26, with each jurisdiction developing its own system based on common principles, bilateral agreements and action plans developed with Ottawa. Importantly, the first-ever federal commitment to keep child care in the nonprofit sphere, set out in 2021 federal law budgetis included in federal/provincial/territorial agreements.

Added to this important and historic pan-Canadian initiative is a second relevant development. Over the past two decades or so, child care – along with other care services such as health care and long-term care, as well as housing – has become a desirable acquisition for “financialization” companies. Thus, private equity firms are now aggressively seeking to buy out centers as “profitable assets”. Dutch newspaper Financial Dagblad observed that: “Investors are tightening their grip on childcare” as large international companies buy up chains or small-scale childcare centers, so some childcare chains are now mammoth At scale. The fact that donor profitability is, in many cases, largely guaranteed by public funding and that risk capital moves easily between countries is well documented. We never imagined how profoundly this phenomenon affected the delivery of child care services in some countries when Canadian advocates were content to deal with the incursion of large American child care corporations. like KinderCare in the 1970s or even ABC Learning in Australia in the 1990s.

A third important factor relevant to the current debate about for-profit child care is the twenty or thirty years of lessons learned from research and experience about best and worst practices in child care policy. . Childcare experts can now cite extensive international research to highlight the pitfalls of relying on the for-profit sector, which is demonstrably less likely to provide affordable, accessible, quality and equitable services, pay decent wages staff or to offer affordable parental fees as benefits. prime. Today there is solid knowledge on what contributes to the worst childcare situations: childcare provision in which parents’ fees are high, educators’ salaries and recognition are low, and the quality is questionable. These situations have developed mainly in jurisdictions using market models of childcare with weak public management of funding. This means that children benefit from poor quality child care or that parents who are “less profitable” miss out on services, while some or a large part of the public financing of child care turns into profits, leaving parents, child care staff, children and taxpayers the losers. It is difficult to say that this is a efficient way spend public money.

With this in mind, it is easy to understand why the current Canadian campaign launched by the for-profit sector has focused on securing commitments from the provincial government to reduce public accountability and public management when the first stage of new, more affordable child care system is lifting off the ground. In Alberta, daycare owners demanded more “flexibility on fee increases” (keeping parent fee increases at 3% is ‘intrusive’) while ‘private industry is good for parents and children as competition drives quality’. The message of the Ontario campaign – in conjunction with an international public relations firm – is that women entrepreneurs who own small businesses are “sounding the alarm…about the level of government micromanagement currently proposed as a condition of their continued participation. to the $10/day System”. This campaign attracted public and media attention by reporting that for-profit operators (which provide about 30% of full-time child care in Ontario) would refuse to join the new child care program, depriving thus parents of promised fee reductions or even their childcare space, as the threat of center closures looms.

In response, the Ontario government “relaxed the operator worries about bureaucratic incursions into his businessrewriting the guidelines made public when Ontario joined the federal program last spring. Rather than strengthening the cost control framework as outlined in its OK with Ottawa, the Ontario government eliminated elements originally intended to strengthen accountability for federal funds. Changes include: no cap on profits, not requiring an audit, reducing the oversight role of municipalities (which are mandated local service managers) to determine “reasonable” mortgage and rental costs. In addition, the use of center quality assessment tools by municipalities to determine public funding discretion has been prohibited by the provincial government.

This accountability deficit goes against the spirit of the pan-Canadian agreement to build an accessible, affordable and high-quality child care system, one of the elements of which, while public funding of growing exponentially, must include accountability for public funds. But accountability doesn’t just apply to nonprofit and for-profit daycares on the ground. Accountability is also an obligation that must extend to provinces and territories, each of which has negotiated an agreement and action plan detailing the policies and delivery conditions that shape their child care system by evolution for which they will receive substantial new federal funding.

Overall, the available data tells us that boosting the for-profit child care sector – both by accelerating the realization of profits from public funds and by continuing to support the expansion of its supply as demand increases – will only continue the failed child care market that Canada has always known. This will reduce the ability to take advantage of the potential economic and social benefits of early learning and child care or meet the pan-Canadian principles established for the new program – affordability, accessibility, quality and inclusion.

The formula for a quality, accessible and equitable child care system is not found in for-profit child care. For-profit owners’ demands for less liability, more profit and expansion must be resisted. At the same time, governments must develop and implement proactive plans to expand public and nonprofit services. This will require governments to take action to support and develop a skilled child care workforce, which is the cornerstone of a quality child care system now and in the future.

Ultimately, how the issue of for-profit child care is addressed will determine whether Canada builds a child care system capable of achieving the ambitious goals shared by so many.

Editor’s Note: This post originally appeared on Child Care Canada website.

]]>