"...they seem to have set the bar very low in their guidance - does management usually do that?"
They do it all the time; expectation management is a key plank in the job spec of the modern CEO of any publicly-listed company.
But I'm not too sure why you reckon the guidance is conservative...I think it is quite realistic.
This result was a lot softer than I had expected:
- growth in the core Paints business slowed despite market conditions that appear to have been very robust (boom in housing market and renovations), and they reckon margins will fall in the next half
- the businesses acquired as part of the Alesco deal actually declined (!) despite the strong market conditions.
At P/E multiple of close to 20x going into this result, the stock was priced for a very good result, but the opposite has happened.
The legacy paint business is a fine business (whose quality has been diluted by bad business they have bought, and one hopes they have learnt their lesson and don't acquire again, especially at this elevated point in the construction cycle.)
At 17.5x P/E after today's share price fall, the stock is still too expensive for me to add to my existing holdings. I'm hoping it falls to the mid $5 level, which is where I see value emerging.
DLX Price at posting:
$6.22 Sentiment: Hold Disclosure: Held
