On November 6, 2018 Broadridge (BR) released Q1 2019 results and reaffirmed FY2019 guidance which it has provided at the time of its release of FY2018 financials on August 7, 2018.
In my previous BR article I viewed shares as expensive and suggested investors patiently for a better entry point.
Following the release of Q1 results, BR's shares pulled back ~9.70% from the previous business day's close. Shares are now ~24% below the 52 week high set as recently as mid-September 2018.
I now view shares as being reasonably valued and have acquired additional shares which are held in the FFJ Portfolio 'side accounts'.
- BR shares dropped ~9.7% upon the November 6, 2018 release of good Q1 2019 results and the reaffirmation of encouraging FY2019 projections.
- In my August 7th article I indicated I was of the opinion that BR shares were overvalued and that investors should wait for BR shares to pullback.
- BR’s FY2017 – FY2020 growth objectives call for Recurring Fee Revenue Growth of 7% - 9%, Total Revenue Growth of 5% - 7%, Adjusted Op Income Margin Expansion of ~50 bps/year, and Adjusted EPS Growth of 14% - 18%.
- I view the ~9.70% pullback in BR’s share price from the November 5th closing price and subsequent to the release of Q1 2019 results as highly favorable and have acquired additional shares.
‘Long-term shareholders have generated significant returns but its current valuation appears to be somewhat stretched.’
‘The stock might be somewhat richly valued at this stage (in my opinion) but if we get a long overdue market correction, this company’s stock price will likely retrace to a more reasonable valuation at which time I would ‘back up the truck’.’
And in the version of the article restricted to subscribers I concluded with…
‘BR has certainly rewarded me well and I continue to view it as a company with a very promising future. Having said this, I think Mr. Market has bid up the price to a level where perfection is expected. At some stage, I envision BR will retrace to a more reasonable valuation; I do not expect BR to retrace to a PE in the teens but somewhere between the low – mid 20s seems more reasonable.’
Well…fast forward to November 6th and BR has released Q1 results. Results were good but with the stock being richly valued, Mr. Market hammered BR’s shares knocking ~9.7% from the November 5th closing price of $116.50.
Based on Q1 2019 results, projections provided by management, and my long-term outlook on the company I have acquired 400 BR shares for the ‘side accounts’ within the FFJ Portfolio. These shares are in addition to BR shares held in undisclosed accounts.
Is it possible BR shares could fall further? Of course. I make my investment decisions, however, on the basis of valuation, the company’s long-term prospects, and risk level. I don’t get worked up over stock price gyrations.
An overview of BR and how it has performed subsequent to its spin-off from Automatic Data Processing (ADP) has been provided in previous articles: February 9, 2017, May 13, 2017, August 11, 2017, February 9, 2018, July 16, 2018, and August 7, 2018 articles.
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