SiteOne Shares Initiated At Buy By Deutsche Bank

Deutsche Bank analysts, Nishu Sood and Rob Hansen, have initiated SiteOne Landscape Supply Inc

shares with a Buy rating and kept a price target of $33.00. It still provided 15 percent upside potentials. The brokerage believes that it has a growth path that could stretch for several years for SiteOne from a revenue and margin perspective. The two analysts said that in landscape supply, not only is SiteOne the biggest player, but also the only consolidator, the only planned one-stop shop and the most transformed in the recent past. Sood and Hansen said, "Many avenues for revenue and margin growth On the revenue side, end market growth should be able to drive mid-single digit growth, mostly volume driven. Acquisitions should add another roughly $100 mm/year in revenues while category expansion at existing locations can amplify growth as well." They added, "On the margin side, management has developed a five-pronged strategy to drive margins through pricing, category management, supply chain, salesforce and marketing. These initiatives are about one-third complete and should help drive margins through 2018." The brokerage said that Cash flow would be boosted the next few years by enhanced inventory turns while cyclical risk mitigated by 45% maintenance exposure and good execution. While 45% of revenues that are maintenance driven would see muted declines in a downturn, the remainder of the business would be more affected. However, organic growth initiatives, acquisitions and margin efforts could offset cycle impacts on earnings. As far as valuations, Deutsche Bank said it was based on its DCF and EV/EBTIDA methodologies. Shares of the company traded 1.35 percent higher on Monday.