Best days in the pipeline

We met with a bullish thesis On Core & Main, Inc. (NYSE: CNM) in ValueinVestorsClub for yellow. In this article, we will summarize the thesis of bulls on CNM. Company’s shares were listed at $ 48.00 when this thesis was published, in the face of the closing price of $ 52.53 on April 25.

A natural gas pipeline by cutting through a rural landscape.

CNM distributes water, wastewater, storm drainage and fire protection products and related services in the United States. It has a 20% market share in the United States in a highly fragmented industry where 60% are covered by independents.

Although pipes represent most sales, gross margins can be up to 5%. The profits are largely based on specialized products that offer a gross margin 5x more than pipes. This is why a 10% decrease in PVC prices did not harm CNM’s return from 2022 to 2024. To put in perspective the numbers, a 50% decrease in PVC pipe revenue would reduce only 3% gross profits. Therefore, worries about reducing the revenue of pipes that affect the bottom line do not stay well.

In 2024 it was a year when water infra projects had to be stopped due to bad weather. This led to the management of the FY2024 orientation, which caused 15% of the price of the shares on the same day. These projects are not of a discretionary nature and are expected to resume by 2025. The assignment of $ 50 billion to water infra projects in the Law on Infrastructure and Investment jobs is also not used due to bureaucratic delays. Financing should provide more modifications to CNM business by 2025.

High interest rates are also one of the reasons why project developers have not wanted to accelerate funding. With rates cuts around the corner, you can expect more funding and a better demand for products in water projects. This was indicated on Ferguson’s earnings call, the water work division is a direct CNM competitor.

CNM should realize a $ 1 billion EBITDA by 2025, up to $ 1.5 billion by 2028. Using Multiples EV of Ferguson, 2024-2028 EV reaches $ 15-23 billion, which reflects a $ 60-100-100 actions price. According to the current price, the potential advantage is between 14 and 90%.

Although we recognize the potential of CNM as an investment, our conviction lies in the belief that some AI actions have a greater promise to obtain higher yields and do it in a shorter period. If you are looking for a stock of Ia more promising than the CNM but you are quoting less than 5 times, see our report on the Ia stock cheap.

Read below: 8 best pit shares to buy now and 30 stocks of IA most important according to BlackRock.

Dissemination: None. This article was originally published in Insider Monkey.