Summary
MSC Industrial Direct has done well to grow its business at a steady rate over the past few years, with an exception for the pandemic year of 2020.
Despite some continued pain since, the company’s overall outlook is favorable and its fundamental condition is secure.
Though shares are pricey compared to the competition, they look reasonably priced on an absolute basis.
Looking for a helping hand in the market? Members of Crude Value Insights get exclusive ideas and guidance to navigate any climate. Learn More »
Evkaz/iStock via Getty Images In the modern era, machines are omnipresent. And with the demand for these machines, will ultimately come the demand for products aimed at maintaining them, repairing them, and continuing to operate them. It stands to reason that in such a mechanized era, companies dedicated to providing these products and related services would sprout up. One such firm is MSC Industrial Direct ( MSM ). In recent years, the company has exhibited consistent growth. It took a step back because of the COVID-19 pandemic, but performance since then has been encouraging. Add on to this the consistent and growing cash flows the company has achieved in recent years, and the fact that shares are trading at levels that should be considered cheap or, at worst, fairly valued, and it should make for an interesting risk to reward prospect for long-term, value-oriented investors. A diverse enterprise
MSC Industrial Direct describes itself as a major supplier of metalworking, and maintenance, repair, and operations products and services in North America. The business operates through 11 customer fulfillment centers, seven of which are located in the United States, with another three in Canada and the last one in the United Kingdom. It also has seven regional inventory centers and 28 branch offices across the globe. This is in addition to the six smaller customer fulfillment centers that it currently operates.
Through the company’s massive network, it provides its customers with access to 1.9 million active, saleable SKUs (stock-keeping units). Products the company sells include cutting tools, measuring instruments, tooling components, metalworking products, fasteners, raw materials, power tools, janitorial supplies, and more. All of this is in addition to the company’s portfolio of software applications, including Ap Op, which allows their own metalworking specialists to document productivity savings for customers for various applications. It also offers something called MSC Millmax, which helps to reduce costs and improve productivity associated with the milling process for its customers. Author – SEC EDGAR Data In the years leading up to the COVID-19 pandemic, MSC Industrial Direct succeeded in steadily growing the business. Revenue grew from $2.89 billion in 2017 to $3.36 billion in 2019. Then, in 2020, sales dropped slightly to $3.19 billion. That decline was short-lived, however, because in 2021, sales popped up to $3.24 billion. Only one quarter worth of data is available for the company’s 2022 fiscal year, but that data is also encouraging. Sales came in at $849 million. That represents an increase of 10% over the $772 million generated in the first quarter of the company’s 2021 fiscal year.
Profitability for the company has been a bit more problematic. Even prior to the pandemic, there was no clear trend. Net income ranged from a low of $231 million to a high of $329 million prior to the pandemic. Then, in 2020, it remained in that range, hitting $251 million before dropping to $217 million in 2021. More consistent has been operating cash flow. This increased in three of the four years through 2020, ultimately rising from $247 million to $397 million. But then, in 2021, it dropped to $224 million. If we adjust for changes in working capital, the picture gets even less clear. Ultimately, it peaked in 2019 at $396 million. In 2020, it came in at $380 million before dropping to $365 million in 2021. A similar trend can be seen when looking at EBITDA. After hitting a high of $499 million in 2018, it has been on a constant downslope, eventually hitting $444 million in 2021. Author – SEC EDGAR Data For how little data is available for the 2022 fiscal year , the results so far are generally positive. Net income in the first quarter came in at $66 million. That’s nearly double the $38 million achieved one year earlier. Operating cash flow did fall, plunging from $103 million to $58 million. But if we adjust for changes in working capital, it would have risen from $67 million to […]
source MSC Industrial Direct: A Reasonable Prospect For Value Investors
Protected by Patchstack