We are moving Jeld-Wen Holdings (JELD) from HOLD to SELL
The company is executing on its turnaround, led by the relatively new CEO. However, after our more detailed review of the company’s future prospects, the shares appear to fully discount a robust profit recovery and are trading at our price target. Their Investor Day was uninspiring – while the company is operating much better and has at least a temporary cyclical tailwind, the management is talking about pursuing their growth ambitions, going so far as to outline as much as $4 billion in buying power over the next several years. For perspective, $4 billion in cash flow compares to the company’s current $2.7 billion market cap.
For a moderately capital-intensive business in a cyclical industry, with valuations for its potential acquisition targets likely not at a discount, this is not an encouraging direction. Rather than being wasted on empire-building, we would rather see its cash flow returned to investors.
We are moving the shares from HOLD to SELL. Based on mid-day prices, the investment produced a 72% profit.