Some industries make it very difficult to
deliver consistent results every quarter, but I don't think that really
explains the consistently inconsistent results at Multi-Color (LABL),
as wobbles in quarterly growth rates have been blamed on
acquisition-related hiccups (even though growth through acquisition has
been a core driver for a long time), plant inefficiencies, contract
changes, mix shifts, and so on. Multi-Color has likewise had a tough
time showing consistent margin leverage, though the choppy trend has
still been upward.
Since my July 7 update, the company has announced the acquisition of Constantia Labels,
a transformative deal, and announced another iffy quarter. Management's
up-and-down execution increases the integration risks for such a large
deal (not to mention the mix shift), but it is worth noting that it will
be Constantia's CEO leading the company relatively soon.
I've
more or less made my peace with Multi-Color's inconsistencies, but
Constantia doesn't add tremendous incremental value relative to the
risk. That said, the shares do look 10% to 15% undervalued now and the
company is an under-followed consolidator in a large, fragmented, and
relatively recession-resistant industry.
Read more here:
Another Quarterly Wobble At Multi-Color Ahead Of A Transformative Deal
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