I was recently asked to do an analysis of The Brink’s Company’s stock. I have posted this analysis below.
I see BCO as a dominant player in a slowing industry. With consistent dividend payments, high levels of cash, and a relatively low NTM P/E ratio this appears to be a safe value play. The company does tout a high level of debt but I view this as a possible positive for Brink’s as it may force them to expand and generate profit from within as opposed to relying on acquisitions. As of right now I do not believe Brink’s is at a good buying position as it is currently overbought but if bought following a price drop in the coming weeks this could be a reasonable value play. However, there are many aspects of this company that deter me and I would not buy this stock.
Due to an increase in the usage of mobile payments, I expect that the need for armored transportation services will decrease moving forward.
However, as of right now the business is thriving and revenue has increased in every quarter since Q1 2016. The recent acquisition of Dunbar can be viewed as positive due to Brinks’ commitment to investing in the future. I tend to view investing in growth as a positive, however, I would love to have seen Brinks invest more in their own operations and generating consistent profit there as opposed to outsourcing and expanding through an acquisition.
Brink’s separates itself from competitors through its strong global market position, especially in South America. However, political unrest in Venezuela has lead to losses of $127 million in 2018.
Brink’s boasts strong growth and operating margins but large one time non-operational expenses repeatedly bring down earnings (deconsolidation of Venezuela operations, reorganization and restructuring costs, impairment losses, etc.). I view this as a bad sign and an indicator that these one-time/unusual expenses may be more consistent than management wants to let on.
Due to an inconsistent ability to produce positive earnings, alignment in a slowing industry, and the fact that many of Brinks’ “unusual” expenses may be more recurring than the company would like to let on, I advise SELLING Brink’s at the current price of $74.