Zalando (ZAL GR) Germany
Consumer Discretionary
Iron Blue initiates coverage on ZAL with a score of 28/60, which is top decile (fertile grounds for shorting) and an outlier compared with bottom decile/quartile scores of internet peers Auto Trader (13/60), Rightmove (11/60) and Scout24 (16/40). They highlight 1) Increased use of stripped out restructuring and other costs. 2) Stripped out share-based payments (27% PBT adj). 3) Profit recovery supported by compressed fulfillment, marketing and inventories provision expenses. 4) Pronounced gap between tangibles capex and the depreciation charge. Re. governance, they note CEO variable pay targets that are either undisclosed or below external targets, a non-independent Remuneration Committee and sizeable related party transactions. FY24 sees a change in auditor following the incumbent’s tenure of 13 years.
Edition: 202
- 10 January, 2025
UK Risk Rankings
Paul Hollingworth sifts through ~300 UK companies to ascertain their financial risk. He incorporates seven different Risk Models and scores companies by each model to come up with an aggregate Score. Investors should not be chasing high risk or "a dash for trash" (as we saw in Jan) but should combine classical valuation assessment with low risk opportunities. Companies featured in the top quartile of low risk include Renishaw, Rightmove, Sylvania Platinum, AG Barr, Rotork and Wilmington. Investors should eschew companies such as Wizz Air, Aston Martin, Mitchells & Butlers, Rolls Royce and Ocado. Let alone small caps such as Kromek, Plant Health or Pressure Technologies.
Edition: 154
- 17 February, 2023
UK: The Manufacturing fan club still looks expensive
Despite Croda, Halma and Spirax having seen 40%+ share price falls YTD, Willis Welby, who specialise in expectations analysis, still struggle to make sense of the share prices. Their caution is compounded when they consider what is available elsewhere. The UK market is not renowned for its growth names, but that does not mean there are none. They see Rightmove, Auto Trader, Softcat and Experian as looking particularly attractive.
Edition: 138
- 24 June, 2022