XPEL Stock Study (6-6-24)
Posted by Mark on July 15, 2024 at 10:53 | Last modified: June 6, 2024 11:33I recently did a stock study on XPEL Inc. (XPEL) with a closing price of $39.56.
M* writes:
> XPEL, Inc. sells, distributes, and installs after-market automotive
> products. The company offers automotive surface and paint
> protection, headlight protection, and automotive and architectural
> window films, as well as proprietary software. It also provides
> merchandise and apparel; ceramic coatings; and tools and
> accessories, which include squeegees and microfiber towels,
> application fluids, plotter cutters, knives, and other products.
> In addition, the company offers paint protection kits, car wash
> products, after-care products, and installation tools through its
> website. The company sells and distributes its products through
> independent installers and new car dealerships, third-party
> distributors, automobile original equipment manufacturers, and
> company-owned installation centers, as well as through franchisees
> and online channels… XPEL is headquartered in San Antonio, TX.
Over the past six years since public trading began, this small-size company has grown sales and earnings at annualized rates of 31.7% and 43.8%, respectively. Lines are up, mostly straight, and parallel.
Since 2018, PTPM leads peer and industry averages while trending higher from 10.4% (’18) to 16.7% (’23) with a last-5-year mean of 15.0%. ROE also leads peer and industry averages despite falling from 42.5% (’18) to 31.7% (’23) with a last-5-year mean of 38.7%. Debt-to-Capital is lower than peer and industry averages despite increasing from 8.1% (’18) to 16.7% (’23) with a last-5-year mean of 21.2%.
Quick Ratio is 1.2 and Interest Coverage is 51.2. Value Line gives a B+ rating for Financial Strength.
With regard to sales growth:
- YF projects YOY 4.7% and 7.6% for ’24 and ’25, respectively (based on 2 analysts).
- Zacks projects YOY 3.0% and 6.2% for ’24 and ’25, respectively (1 analyst).
- Value Line projects 10.4% annualized growth from ’23-’28.
- CFRA projects 4.7% YOY and 6.2% per year for ’24 and ’23-’25, respectively (2).
With only one long-term projection, I am applying a 50% haircut for my conservative forecast of 5.0% per year.
With regard to EPS growth:
- MarketWatch projects 7.1% per year contraction for ’23-’25 and 0.7% growth per year for ’23-’26 (2).
- Nasdaq.com projects 11.3% YOY growth for ’25 (1).
- Seeking Alpha projects 4-year annualized growth of 30.0%.
- YF projects YOY 12.0% contraction and 19.0% growth for ’24 and ’25, respectively (2).
- Zacks projects YOY 16.2% contraction and 11.2% growth for ’24 and ’25, respectively (1).
- Value Line projects 9.8% annualized growth from ’23-’28.
- CFRA projects 31.4% YOY growth for ’24 (1).
Analyst estimates are scant—both in number of sources and analysts per source. I therefore want a solid margin of safety (MOS). As one of two long-term projections, Seeking Alpha not only seems very high but is also unchanged from nine months ago making me question its legitimacy. I am forecasting less than both projections (mean: 19.9%) at 9.0% per year. I will use 2024 Q1 EPS of $1.73/share (annualized) as the initial value rather than ’23 EPS of $1.91.
My Forecast High P/E is 28.0. Since 2018, high P/E ranges from 22.5 in ’18 to 91.1 in ’21 with a last-5-year mean of 62.0 and a last-5-year-mean average P/E of 41.6. I am near the bottom of the range (only ’18 is lower).
My Forecast Low P/E is 15.0. Since 2018, low P/E ranges from 8.2 in ’19 to 38.7 in ’21 with a last-5-year mean of 21.2 and a last-6-year median of 17.8. I am forecasting toward the lower end of the range [only ’19 and ’20 (11.4) are less].
My Low Stock Price Forecast (LSPF) of $29.40 is default given initial value from above. This is 25.7% less than the previous close and 4.5% less than the 52-week low.
These inputs land XPEL in the HOLD zone with a U/D ratio of 2.6. Total Annualized Return (TAR) is 13.5%.
PAR (using Forecast Average—not High—P/E) is less than I seek for a small-size company at 7.6%. If a healthy MOS anchors this study, then I can proceed based on TAR instead.
To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 141 studies done in the past 90 days (my study and 27 other outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 13.0%, 13.0%, 31.0, and 19.6, respectively. I am lower across the board. Value Line projects a future average annual P/E of 21.0 that is less than MS (25.3) and less than mine (21.5).
MS high / low EPS are $3.47 / $1.84 versus my $2.66 / $1.73 (per share). My high EPS is less due to a lower growth rate. Value Line’s high EPS of $3.05 is in the middle.
MS LSPF of $33.40 implies a Forecast Low P/E of 18.2 versus the above-stated 19.6. MS LSPF is 7.4% less than the default $1.84/share * 19.6 = $36.06, which results in more conservative zoning. MS LSPF is 13.6% greater than mine, however.
TAR (over 15.0% preferred) is less than MS 20.1%. I believe MOS to be robust in the current study.
With regard to valuation, PEG is 2.3 per my projected P/E: slightly overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is extremely low at 0.53.
Value Line projects 65% stock appreciation over the next 18 months while its analyst writes, “shares… are ranked to underperform the broader market averages in the year ahead.” Something seems off unless they are projecting a sharp stock rally in months 13-18, but even their Timeliness rank does not aim for that level of precision.
U/D has XPEL a BUY under $38/share while the BI TAR criterion will be satisfied ~$37 given a forecast high price over $74.
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