Special Report on XPEL Tomorrow
35 pages based on 54 interviews | Upgrade to paid to receive
Tomorrow at 11am EST, Hidden Gems Investing will publish a 35 page report on XPEL, a company that we believe could be worth double today’s stock price in three years.
Our research included 54 interviews with industry experts and additionally dozens of shorter discussions with installation shops around the world. Upgrade to paid now to make sure you receive a copy when it is released tomorrow.
XPEL is a great business going through a blip. The company is the leading supplier of films that protect the paint or windows of your car, a bit like the film protecting your phone’s screen.
Over the last five years the stock has gone from $15 to $100 and back to $32 after XPEL went from delivering 30%+ returns on capital and 25% growth to suddenly 6% growth and reduced margins in 2024. We believe investors are extrapolating 2024 to be the new normal when in fact XPEL still has a long runway of around 13% organic growth and that margins will rebound.
The company is led by CEO Ryan Pape, who has high integrity, a strong customer focus, and has done an excellent job allocating capital. Pape owns shares worth $35mm and is aged 43, giving him a long runway too and incentive to keep compounding capital.
We think an investment at today’s price carries an asymmetric risk/reward. XPEL reported EPS of $1.65 in 2024 and even assuming no growth or margin normalization over three years and a mere 12x P/E multiple would put the stock on $20. Adding $5 of cumulative cash generation implies a total return of $25 for around 25% downside.
On the other hand, we believe that organic growth and reinvesting cash into acquisitions will grow EPS to $3.2 in three years. A 20x P/E, consistent with a business that reinvests all cash at 20% returns, would value the stock at $64 for a double from today's price.
The report tomorrow will discuss XPEL’s:
Moat and why it is underappreciated
Long runway to grow across channels, geographies, and pricing power
Difficult cyclical conditions
Governance, management, and culture
Valuation scenarios
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About the Author
My name is Chris Waller and I am the Founder and Portfolio Manager at Plural Investing. I believe that in-depth research can lead to the discovery of small cap businesses that are ‘hidden gems’. If you have questions about Plural Investing, you can contact me at chris.waller@pluralinvesting.com.
I previously worked at Goldman Sachs Asset Management as a member of the investment team for the Global and International Small Cap funds. I have an MBA from the Value Investing program at Columbia Business School, BA in Economics and Management from Oxford University, and am a member of Value Investors Club and the Manual of Ideas.
This article is for informational purposes only and is not investment advice. Plural Investing, LLC currently holds a position in XPEL. Read important disclosures here.