ACCO
I brought a small position of ACCO Today at $4.94 here is what I like.
1) Dividend- You get paid while you wait, actually you will get slightly north of over 6% buying it at these levels. So that is a plus. They also continue to sound committed to the dividend and the earnings clearly cover the dividend, so I feel it is safe.
2) Valuation- Given Guidance of $1.07-1.11, I actually believe earnings will be about $1.15 this year, but using the range we are talking about a pe of just 4.5 times this year’s estimates.
3) Why Now? One can argue this what has changed to make you like this one now, it is always dirt cheap, they have a ton of debt, and growth is limited at best. With being quick, and getting right to the point that is the argument against owning the stock for the most part. I think ACCO will revalue (Say 7-8 PE) I think number will start to improve y/y particularly in the second half. I also like That ACCO has focused on getting costs under control with a 60 million cost savings initiative they started this year. I see this will be a plus to the bottom line especially later in the year and beyond. I also expect ACCO to continue to reduce debt, they are focused on it, and I have never really feared debt, I have feared companies who want to add more, and have no plans of knocking it down. But what I like the most and here is what has changed is they turned Adjusted Free Cash Flows around it was only 78 million in fiscal year 22. It was a whopping 118 million in FY 23, and at least 120 million is expected in FY 24. Furthermore, they expected at least 100 million in adjusted free cash flow at the end of q4 fiscal year 22 for 2023 and came in with 118 million, hence I feel that 120 million might be low. Why do we care about cash flow in this case, this is how we are going to get debt down, and since I now see they are being serious about generating more cash flows (They only did 78 million in fiscal year 22), hitting the bottom line, they are getting serious about cost reduction with a 60 million cost saving initiative starting this year. And I believe moderate growth will start to return in fiscal year 25, I see earnings starting to grow at the back end of the year and into FY 2025. Time will tell if I’m right. I’m not saying ACCO will ever get a high PE, but could we see a revaluation to say a 7 PE if the positive things I mentioned start to really continue to show, I believe that is strongly possible.
Conclusion: This is my case of why I’m attracted to ACCO here, and brought a small position. I will continue to add on weakness. All is just my opinion, and I could always be wrong though.
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