Latest news with #AYI
Yahoo
01-06-2025
- Business
- Yahoo
Is Acuity Inc. (NYSE:AYI) Trading At A 27% Discount?
Acuity's estimated fair value is US$355 based on 2 Stage Free Cash Flow to Equity Acuity is estimated to be 27% undervalued based on current share price of US$260 Analyst price target for AYI is US$306 which is 14% below our fair value estimate Today we will run through one way of estimating the intrinsic value of Acuity Inc. (NYSE:AYI) by estimating the company's future cash flows and discounting them to their present value. We will use the Discounted Cash Flow (DCF) model on this occasion. Don't get put off by the jargon, the math behind it is actually quite straightforward. We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF ($, Millions) US$413.3m US$573.1m US$596.8m US$617.5m US$638.0m US$658.5m US$679.1m US$699.9m US$721.1m US$742.8m Growth Rate Estimate Source Analyst x4 Analyst x4 Analyst x2 Est @ 3.48% Est @ 3.32% Est @ 3.21% Est @ 3.13% Est @ 3.07% Est @ 3.03% Est @ 3.00% Present Value ($, Millions) Discounted @ 8.1% US$382 US$490 US$472 US$452 US$432 US$412 US$393 US$375 US$357 US$340 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$4.1b After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.9%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 8.1%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$743m× (1 + 2.9%) ÷ (8.1%– 2.9%) = US$15b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$15b÷ ( 1 + 8.1%)10= US$6.8b The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$11b. In the final step we divide the equity value by the number of shares outstanding. Relative to the current share price of US$260, the company appears a touch undervalued at a 27% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Acuity as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 8.1%, which is based on a levered beta of 1.196. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. Check out our latest analysis for Acuity Strength Earnings growth over the past year exceeded the industry. Debt is not viewed as a risk. Weakness Dividend is low compared to the top 25% of dividend payers in the Electrical market. Opportunity Annual earnings are forecast to grow for the next 3 years. Good value based on P/E ratio and estimated fair value. Threat Annual earnings are forecast to grow slower than the American market. Although the valuation of a company is important, it is only one of many factors that you need to assess for a company. DCF models are not the be-all and end-all of investment valuation. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. What is the reason for the share price sitting below the intrinsic value? For Acuity, we've put together three additional factors you should further research: Financial Health: Does AYI have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk. Future Earnings: How does AYI's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NYSE every day. If you want to find the calculation for other stocks just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
Yahoo
15-05-2025
- Business
- Yahoo
Acuity Brands (AYI): Buy, Sell, or Hold Post Q1 Earnings?
Over the last six months, Acuity Brands's shares have sunk to $272.08, producing a disappointing 16.5% loss while the S&P 500 was flat. This was partly due to its softer quarterly results and might have investors contemplating their next move. Is there a buying opportunity in Acuity Brands, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team's opinion, it's free. Despite the more favorable entry price, we're cautious about Acuity Brands. Here are three reasons why we avoid AYI and a stock we'd rather own. A company's long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Acuity Brands's 2.2% annualized revenue growth over the last five years was sluggish. This fell short of our benchmarks. Investors interested in Electrical Systems companies should track organic revenue in addition to reported revenue. This metric gives visibility into Acuity Brands's core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement. Over the last two years, Acuity Brands's organic revenue averaged 3% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Acuity Brands might have to lean into acquisitions to grow, which isn't ideal because M&A can be expensive and risky (integrations often disrupt focus). If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. As you can see below, Acuity Brands's margin dropped by 2.5 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. Acuity Brands's free cash flow margin for the trailing 12 months was 11.5%. Acuity Brands isn't a terrible business, but it doesn't pass our bar. Following the recent decline, the stock trades at 14.7× forward P/E (or $272.08 per share). Investors with a higher risk tolerance might like the company, but we don't really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere. Let us point you toward a fast-growing restaurant franchise with an A+ ranch dressing sauce. Market indices reached historic highs following Donald Trump's presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth. While this has caused many investors to adopt a "fearful" wait-and-see approach, we're leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years. Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
Yahoo
02-05-2025
- Business
- Yahoo
1 Industrials Stock to Own for Decades and 2 to Question
Whether you see them or not, industrials businesses play a crucial part in our daily activities. Still, their generally high capital requirements expose them to the ups and downs of economic cycles, and the market seems to be baking in a prolonged downturn as the industry has shed 10.4% over the past six months. This performance was worse than the S&P 500's 2% fall. Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Taking that into account, here is one resilient industrials stock at the top of our wish list and two best left ignored. Market Cap: $7.40 billion One of the pioneers of smart lights, Acuity (NYSE:AYI) designs and manufactures light fixtures and building management systems used in various industries. Why Do We Think Twice About AYI? Annual sales declines of 1.9% for the past two years show its products and services struggled to connect with the market during this cycle Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth Free cash flow margin shrank by 2.5 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive Acuity Brands is trading at $241.86 per share, or 13.1x forward P/E. Read our free research report to see why you should think twice about including AYI in your portfolio, it's free. Market Cap: $3.91 billion Created through the acquisition and merger of various RV manufacturers, THOR Industries manufactures and sells a range of recreational vehicles, including motorhomes and travel trailers, catering to consumers seeking the freedom and comfort of the RV lifestyle. Why Do We Avoid THO? Annual sales declines of 17.4% for the past two years show its products and services struggled to connect with the market during this cycle Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term Shrinking returns on capital suggest that increasing competition is eating into the company's profitability At $73.41 per share, THOR Industries trades at 12.8x forward P/E. Check out our free in-depth research report to learn more about why THO doesn't pass our bar. Market Cap: $7.16 billion With a significant portion of its products made from recycled materials, AZEK (NYSE:AZEK) designs and manufactures goods for outdoor living spaces. Why Should You Buy AZEK? Average organic revenue growth of 10.7% over the past two years demonstrates its ability to expand independently without relying on acquisitions Operating margin expanded by 16.2 percentage points over the last five years as it scaled and became more efficient Share repurchases have amplified shareholder returns as its annual earnings per share growth of 41.3% exceeded its revenue gains over the last two years AZEK's stock price of $49.77 implies a valuation ratio of 34.2x forward P/E. Is now the time to initiate a position? Find out in our full research report, it's free. Market indices reached historic highs following Donald Trump's presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth. While this has caused many investors to adopt a "fearful" wait-and-see approach, we're leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years. Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free. Sign in to access your portfolio
Yahoo
03-04-2025
- Business
- Yahoo
Industrial Tech Firm Acuity's Stock Sinks on Soft Results, 'Uncertainty' Warning
Shares of Acuity (AYI), which rebranded from Acuity Brands last week, dropped Thursday after the industrial technology company's fiscal second-quarter revenue and profit came up short of analysts' estimates. The firm, which uses technology to "solve problems in spaces, light and more things to come," posted GAAP earnings per share (EPS) that fell 14% year-over-year to $2.45 on net sales of $1.01 billion. Analysts polled by Visible Alpha were expecting $3.14 and $1.03 billion, respectively. Adjusted EPS of $3.73 narrowly beat estimates. Acuity Brands Lighting segment net sales ticked 0.3% lower to $840.6 million. Acuity Intelligent Spaces sales soared more than 150% to $171.5 million, including $95.1 million from two months of results after closing its $1.2 billion acquisition of QSC, a "cloud-manageable audio, video and control platform." Acuity adjusted its fiscal 2025 outlook in January for the impending QSC acquisition, but did not alter it Thursday. "As we look forward, there is obviously uncertainty in the marketplace specifically with regards to tariffs," CEO Neil Ashe said on the earnings call, according to a transcript provided by AlphaSense. "We approach tariffs as the equivalent of a supply shock, and our financial priorities are first to manage the dollar impact. And second, to manage the margin impact." "Across the company, we have taken pricing actions in response to tariffs that were in place through the end of March. As the tariff policy continues to evolve, we will continue to take necessary pricing actions and we will work to accelerate our productivity efforts," Ashe said. Acuity shares were down about 4% in recent trading. They had been slightly positive over the preceding 12 months entering Thursday, before turning lower later in the session. Read the original article on Investopedia Sign in to access your portfolio
Yahoo
03-04-2025
- Business
- Yahoo
Acuity Brands: Fiscal Q2 Earnings Snapshot
ATLANTA (AP) — ATLANTA (AP) — Acuity Brands Inc. (AYI) on Thursday reported fiscal second-quarter earnings of $77.5 million. The Atlanta-based company said it had net income of $2.45 per share. Earnings, adjusted for amortization costs and costs related to mergers and acquisitions, were $3.73 per share. The results beat Wall Street expectations. The average estimate of four analysts surveyed by Zacks Investment Research was for earnings of $3.66 per share. The lighting maker posted revenue of $1.01 billion in the period, missing Street forecasts. Four analysts surveyed by Zacks expected $1.02 billion. Acuity Brands shares have fallen nearly 9% since the beginning of the year. The stock has climbed nearly 2% in the last 12 months. _____ This story was generated by Automated Insights ( using data from Zacks Investment Research. Access a Zacks stock report on AYI at Sign in to access your portfolio
