YB new stock pitches (Mon, Nov 4)

REV Group, Inc. (REVG) has shown improved earnings quality with Fire & Ambulance outperforming expectations and RV underperforming. Despite beating Q3 estimates and upgrading guidance, the stock crashed 30% due to a revenue miss. The company's normalized EBITDA is estimated at $300M+, compared to the $200M consensus. REVG's balance sheet is under-levered with an estimated 0.5x net debt/EBITDA by Q4 FY24. Potential share buybacks could boost EPS to $5+. The stock is trading at approximately 5x normalized EPS, which is considered undervalued for a high-quality industrial small cap. Management upgraded EBITDA guidance and emphasized margin expansion in Fire & Ambulance over the next 18 months. The market's reaction to Q3 results is seen as an opportunity, with the stock's fair value increasing post-earnings. The FY25 estimates now project the RV segment at only 15% of EBITDA, down from 58% in FY23, further improving earnings quality.

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More stock pitches from the Sohra Peak fund letter in “The Rest of the Pitches” section.

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Auto Partner SA (APR.WA), a Polish auto parts distributor, has experienced a 24% LTM revenue CAGR over the past six quarters, with H1 2024 sales up 16% YoY. Despite flat EPS growth due to margin normalization, the company's future prospects look promising. A new distribution center near the German border, set to open in January 2026, is expected to boost export sales by reducing delivery times to Western European countries. The company is also exploring the possibility of opening another DC in Western Europe. Management anticipates a 15-20% EPS CAGR over the next several years, with FY24 earnings estimated at PLN 1.61 per share. At recent prices, the stock trades at a P/E multiple of 13-14x, which the investor views as attractive, prompting them to add to their position. The company's growth potential, particularly in exports, could lead to upside surprises in the future.

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* I use Interactive Brokers link to trade international and OTC stocks (if you can’t trade them in your current brokerage)

Leon's Furniture Limited (LNF.TO) is Canada's largest furniture retailer with a 15% market share, 302 stores, and $2.5B in revenue. The company has demonstrated durability with an 8.5% EPS CAGR over the last 20 years and zero unprofitable years in two decades. Leon's benefits from scale advantages in purchasing, advertising, and distribution, enabling lower costs and wider margins compared to competitors. The family-run business, still 70% owned by the Leon family, has been an excellent steward of capital. The company's undervalued real estate portfolio, worth an estimated $1.2-1.6B compared to the current $1.8B market cap, is set for a REIT IPO by 2025. Additionally, a Toronto headquarters development project could potentially add $200-400M in value. Leon's trades at 6x EBITDA and 9x FCF, with potential catalysts including market share growth, margin improvements, real estate monetization, and continued capital returns to shareholders. The stock is currently a top 5 holding for the investment firm.

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