The company is selling at 6x EBITDA on the low end forecast. Alent and OM group on track, adjusting pro forma for these trasactions.....PAH has about a 20% free cash flow yield.
I would expect the markets to be basic math challenged -- because markets are stupid in the short term. Which gives us great long-term opportunities.
The company paid 6.8 billion for the businesses under PAH in the last 2 years. The market was selling these businesses for 2.5 billion the last few days.
This management isn't stupid. They didn't overpay by 4.3 billion in the last two years. Therefore, PAH going back over $20 per share when the market calms down is a virtual no brainer.
At $20 per share, the market is still valuing the assets 2.6 billion cheaper than management paid for them. So assuming neither the market nor management is perfectly right, this headed higher to a mid point of 20-22 is definitely going to happen, which is still at least 36% higher from here.
Your missing the point. Free cash flow is likely north of 400 million. That is a lot of cushion. Secondly, this isn't a fly by night company. Many of the companies within PAH have been around decades and have weathered EVERYTHING.
The business generates 750 million in EBITDA - CAP EX. Capital markets CAN shut down, especially while PAH integrates, and PAH is still a stellar buy based on current assets, book value, and free cash flow.
So stop flipping out.
The market is putting a value on PAH at half the price the company paid for all its acquisitions last year. PAH spent $5 billion to buy companies last year. I don't believe this includes their anchor investment, MacDermaid.
So this company is being sold at over HALF of what the company JUST PAID last year alone for these businesses in private market transactions.
Even if the capital markets shut down and PAH never did another deal, this company is probably at least a 75 cent dollar at a minimum.
Well, I will say as much as I trust this management team it is discouraging that they bought Alent for 2.2 billion and the entire company is only worth a fraction above that amount now!
And they bought Alent for over 3x sales! While all of PAH is being valued by the marketplace at .70x sales including pro-forma number for the Alent aquisition.
So either the market is totally irrational, or management made a huge mistake. Since this management team knows its business, I'm guessing this is one heck of an entry point for long-term investors.
You have to put in the pro forma numbers for the Alent aquisition When that goes through, the company will generate 700 million in EBITDA-CAP EX alone, calculated conservitely.
Assuming a low tax bracket and subracting interest expense this is selling for 5x free cash flow or over a 20% fcf yield, with companies that have been around for decades.
This company is a high margin business, building its long-term moat, and is selling at almost .80 times sales. This is a company with EBITDA - Cap-ex margins of 20%.
Traders are just selling everything and anything that is a good inflationary hedge or has exposure to emerging markets. Traders just rule these markets and it makes me sick.