We came across about Core & Main, Inc. (NYSE:CNM) bullish paper, which is the yellow ValitiNVestorsClub. In this article, we will summarize the Bulls' paper on CNM. At the time of this article, the company's shares traded at $48.00, compared with the April 25 closing price of $52.53.
A pipeline of natural gas cut through rural landscapes.
CNM distributes water, wastewater, stormwater drainage and fire protection products and related services in the United States. It has 20% market share in the US in a highly fragmented industry, with 60% of which are covered by independents.
Although pipelines account for the majority of sales, gross margins may be as low as 5%. Profits are largely driven by professional products, with gross profit margins of 5 times higher than pipelines. This is why the 10% drop in PVC prices from 2022 to 2024 did not hurt CNM's profitability. To put the figures on perspective, PVC pipeline revenue fell by 50%, which would only reduce gross profit by about 3%. Therefore, concerns about reducing pipeline revenue that affects the bottom line are not good.
In 2024, a year that had to be stagnant due to bad weather. This led to management reducing guidance for fiscal 2024, causing the share price to collapse by 15% on the same day. These projects are not at their disposal by nature and are expected to resume in 2025. Due to bureaucratic delays, the $50 billion allocated to the Infrastructure and Investment Employment Act is also not prohibited. This funding should provide further headwinds for CNM's business in 2025.
High interest rates are also one of the reasons project developers are not keen on speeding up their funds. As the rate of decline decreases, one can expect more funds and better demand for products in water projects. This hints at Ferguson's claim for revenue, whose water division is a direct competitor to CNM.
CNM should achieve $1 billion in EBITDA by 2025 and rise to $1.5 billion in 2028. Using Ferguson's EV multiplex, the 2024-2028 EV reached $1.5-23 billion, reflecting the stock price of $60-100. Based on current prices, the potential upside potential is in the range of 14-90%.
Although we acknowledge the potential of CNM as an investment, our belief lies in the belief that certain AI stocks have greater hope to provide higher returns and do so in a shorter time frame. If you are looking for AI stocks that are more promising than CNM but have less than 5 times its gains, check out our report Cheapest AI stocks.
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Disclosure: None. This article was originally published in Insider Monkey.