YB new stock pitches (Wed, Nov 27)

Titan Machinery, CNH's largest dealer, trades at 0.6x P/TBV and 3.5-4.5x P/E on estimated normal EPS of $3.00-4.00. The stock is down 70% to $14 due to lower crop prices and higher interest rates. An aged fleet and low 10-year equipment sales support a short downturn. The base case target of $30 (+115%) is supported by a 1.3x P/TBV multiple, while the upside case of $46 (+230%) assumes a strong decade ahead. Risks include used equipment markdowns, crop prices, and CNH dependence. Catalysts include inventory reduction beginning in Q3 2024, lower interest rates, cost-cutting measures, and potential crop price increases. The company's structural improvements in parts and service growth, lower operating expenses, and reduced interest costs contribute to margin improvement. Insiders own 10% of the company, with the Chairman buying $1 million of stock in May at $18 per share.

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EVT.DE, a drug discovery and development platform for pharma/biotech companies, is currently trading at €9.24/share, its lowest level since 2017 despite a 3x increase in revenue. Recent buyout rumors by HALO at €11/share were blocked by EVO's management, who believe the offer undervalues the company. This view is supported by Novo Nordisk's PIPE investment at $21/share last summer. The stock's low valuation (<3x sales) is attributed to the biotech industry's downcycle due to rising interest rates and financing challenges. However, given EVO's growth characteristics and margins, management and key industry players, including Novo Nordisk, see significant upside potential from current levels, though the exact fair value remains unclear.

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Mattr Corp (MATR.TO) is an industrial turnaround play led by experienced CEO Mike Reeves, who has transformed the company from a cyclical oil and gas business to a diversified industrial materials supplier. The company has divested cyclical businesses, acquired high-margin operations, and aims for 10% organic growth. Management is executing an aggressive buyback program, maintaining low leverage, and targeting 20% EBITDA margins and 70% FCF conversion. Currently, margins are compressed and FCF is low, but the company trades at 6x FCF with a potential 20% yield at target. The recent Amercable acquisition for 5x EBITDA is immediately 40% accretive to EPS. Mattr's products serve various industries, including mining and infrastructure. The stock's success hinges on management's execution, with early signs being promising but unproven. Valuation looks attractive at current levels, with the market pricing in no growth or margin expansion. Risks include economic headwinds and the need for management to demonstrate their capital allocation skills.

Read the full article here. Read time: 9 min