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Overlooked Stocks: HRI, RVLV, SAIL - YouTube
Channel: TD Ameritrade Network
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welcome back to market on clothes i'm
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tom white filling in for oliver renick
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but let's bring in our next guest and
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that's going to be george tillis a
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contributor across the network to take a
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look at some overlooked stocks welcome
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to the show george
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good to be back with you tom how you
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doing today i'm doing okay markets are
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closed nice little rebound rally but
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we're looking at some overlooked stocks
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that had some good days today sale point
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technologies ticker symbol s-a-i-l up
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over three percent today this is all
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about um maybe enterprise uh governance
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and enterprise uh basically security it
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should be doing well george what do you
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seeing here on sale point
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yeah there's some interesting stuff
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going on with cell point uh yeah you're
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right it this is a company that does
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focus on identity access for enterprise
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solutions customers it's in the realm of
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course of cyber security but they do
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focus on that identity management what
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that does is it gives
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users like access provisions and
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security protocols which again are
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customizable so you can you can of
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course identify
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uh based on work workflows and of course
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assign identity and access codes to
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specific individual users it's a little
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bit different than the cyber arcs or the
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palo alto of the world those companies
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do have identity solutions
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uh enterprise software within their
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cyber security but sale point focuses
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more on the identity governance side of
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the cyber security area so today uh the
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stock was higher i think it's part of
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part parcel of the market of course
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wells fargo
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did of course upgrade the stock they've
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got an overweight with a price target of
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64. but i think what's happening here is
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is that the analysts are now
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starting to recognize some of the
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laggard companies and sellpoint has
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lagged some of their respective peers
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and this includes companies like fort
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fortinet uh cyber arc uh if you will
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crowdstrike is another name which i know
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a lot of people are familiar with but
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sell point on a year-to-date basis is
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actually down about 16 percent so i
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think this is a situation
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where we're seeing a conversion because
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cell point had essentially been more of
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an on-premise based
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software and had some struggles and
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actually
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lagged its peers when it comes down to
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converting to hybrid which means high on
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on-premise but also class so i think
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what's happening here is wells fargo is
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picking off that this is a company that
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is making a little bit more of a quicker
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shift uh than that one had expected in
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the past two of course
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on
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off premise cloud cloud-based software
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as a service and just to give you an
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idea of how it works but what you want
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to do is when this transition occurs you
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actually see top-line sales
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which are real relatively low in this
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case it was about 11 on a year-over-year
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basis report last quarter
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but what they did to know was they did
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meet the estimates for revenue and of
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course eps they guided a little bit
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softer on on ebitda margins for the rest
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of the year
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but within that report when the company
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did report back in
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in
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august they did report average recurring
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revenue about 40 percent with
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subscription revenue now growing at 40
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percent
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and 60 percent of that basically is sas
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so what we're actually seeing is
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embedded in the last earnings report the
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company is actually showing some
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improving trends towards software as a
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service as on the cloud versus again
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strictly on premise and i think that's
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why wells fargo upgraded the stock and
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maybe this is one of these lagging
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performers relative to their respective
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peers
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where they've got their act together in
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other words making a conversion to uh to
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cloud versus the on-premise which again
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gives users flexibility and i think
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that's uh that's optimal for a company
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like this yeah george and if you look at
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sale point and and you bring up that
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point uh over the cloud versus in person
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uh and as companies reopen and get back
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to the offices and maybe you're you know
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using your stuff at home
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your technology at home but then also
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using the office is this a way for them
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to continue to expand uh their product
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offering and
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increase or grow their footprint in this
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particular space
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it does absolutely and that's the thing
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flexibility is key whether it's
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on-premise off-premise which again is
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the the cloud hybrid but also mobile you
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know mobile phones and and such
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uh the software and security associated
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with uh with remote remote governance
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logging is very important i think that's
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the focal point that sailpoint has
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essentially promised for a couple of
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years and seems to be manifesting now
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and this is also a situation where the
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company itself has struggled from a
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profitability standpoint because like i
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said top line sales last quarter were up
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11
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now all together that's not great for a
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tech company
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uh it's it's good i suppose for maybe an
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industrial company the profit margins
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last quarter we're down about 16
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so what we're actually seeing is
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maybe the the worst of the bad quarters
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are done and i think going forward this
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is an interesting name to certainly to
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take a look at especially when you get
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average recurring revenue uh and
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subscription revenue that's uh that's
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trending in the 40 range and what
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that'll eventually do
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is bring up your you're not necessarily
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top line sales but your ebitda margins
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and i think this is maybe why we're
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starting to see some coverage on the
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company after after spending quite a bit
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of money to make this transition
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all right george let's move on to our
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next one uh and that's going to be
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something you know i just don't get
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right it's online fashion retailer for
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millennial and generation z consumers
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not my
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metrics at all uh this is revolve group
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uh rvlv is a ticker symbol rallied about
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five percent today uh what do you see in
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here for this uh online retailer
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yeah i was gonna say you took the words
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out of my mouth tom i don't get this
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kind of retail either but interesting
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enough uh it is an internet retail
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company revolve group they focus on
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millennials and gen z customers this is
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where the trends are this is where the
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spending habits are so this is a company
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that basically focus on focuses on more
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casual brands but also they've got a
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division called forward which is a
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little bit more on the premium side and
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it's important to have
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flexibility meaning that they're selling
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a lot of volume on lower price point
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products but also premium and luxury
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brands
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uh if i went to their website because i
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had to figure out what they sell and
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they sell about a thousand different
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brands
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uh they have a lot of eclectic and niche
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brands i've never heard of but they also
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sell brands that's our national brands
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are actually global brands like nike and
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levi so uh they seem to be well uh well
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encompassed in terms of the products
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they offer now today web bush did
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upgrade the stock
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they've got a 72 dollar price target
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on the name and uh i think they're
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actually looking at not necessarily the
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consumer spending habits and social
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trends in fashion a lot of influencers
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seem to be really on board with uh with
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revolve groups products uh tom
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but the financial fundamentals also make
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some sense and i think if you look at
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gross margins at 55
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that's more in line with luxury
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retailers
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profit margins around 15 percent which
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far exceed companies like ralph lauren
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even nike
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uh but i think if you look at the the
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free cash flow the sales ratio they're
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trending the company is in about 14
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range for fiscal year 2021 and that's
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pretty impressive
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for uh for any company but it's also
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quite impressive for a retail outlet so
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they seem to have scalability they seem
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to be very nimble uh and very flexible
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in the brands that they have but they
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have the right niche in terms of fashion
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trends premium but also
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uh you know the average consumer-based
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brands with lower price points and with
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that blend uh they seem to be doing very
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well from a financial fundamental
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standpoint with also top-line sales
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trending around 60 year-over-year based
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on last quarter's metrics so george
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i see that they've got over 500
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third-party brands but are they scooping
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up a lot of these brands that were maybe
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down downtrodden in the market or maybe
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gone bankrupt where they can scoop them
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up at a cheap uh level
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and then re kind of rebrand them within
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this uh you know the social media
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landscape and the in-floor landscape
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where they they can raise profit margins
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just because the fact that they're
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really not based in stores right it's
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just all uh e-commerce right
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that's exactly right and that's where
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that's where you get these this margin
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profile that's really relatively rushed
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i mean talking net profits around 15
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and as i mentioned when you've got you
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know third-party brands 500 but a
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thousand plus different brands
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which include very very specific niche
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brands and niche brands themselves don't
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have a platform in the marketing budgets
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to sell in in big scale or large volumes
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and so they hook up with companies like
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revolve group which aggregate all these
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smaller niche brands for distribution
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and sales and of course revolve group
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gets a commission or a cut of the sale
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so i think what's happening is there's a
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lot of different uh niche brands out
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there that need a platform but also they
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need social media trends and i think
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revolve group has done an exceptional
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job based on their metrics to do so
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uh but there's a lot on their website
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for those who are interested you have to
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check it out uh i'm not a gen z or or a
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millennial so it's too uh too
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fashionable for me i'm old school but at
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the end of the day i think if you look
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at what's happening
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uh uh events uh they focus uh on style
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events you know concerts weddings things
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like that and i think people want to
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spend a little money to dress up now
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because of uh you know being at home and
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i think social events are areas where
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people are willing to spend a little
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money to uh to look at and i think
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revolve group is uh it's pretty much
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locked into this uh these trends and
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these trends in retail can last for
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quite some time before uh before they
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fade out yeah i like those profit
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margins on that one uh no wonder the
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stock's done really well so far this
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year but we got another stock to cover
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here uh george herc holdings hri is a
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ticker ticker symbol it was down on the
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day but it hit another all-time high
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throughout the session
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up over 150 percent i believe this year
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uh they just raised their fiscal year 21
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even a view late last month what are you
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seeing here on hri
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well we actually see tom is a company
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that's on a year-to-date basis up 160
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percent and it's uh it's a company that
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was spun off from hertz group uh as
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basically a separate rental and leasing
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services company it's the third largest
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in the united states
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behind the publicly traded united
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rentals which i'm sure a lot of people
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are are aware of or know uh in a pub and
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they privately trade a private privately
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held company called sun sun belt but
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basically the equipment that they
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lease are in specialty machinery areas
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aerials which are boom lifts uh for
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things like the uh construction industry
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but also for the entertainment business
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like the movies business uh materials
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handling environmental solutions
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equipment industrial and energy are
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another a few areas that the business is
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uh leasing equipment into but it's
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hitting you all-time highs and if you
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look at the chart compared to united
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rentals it's done exceptionally well
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especially since uh the uh the ebitda
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guidance on their investor day i mean
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their guidance
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went from around 12 to 15
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and this is a pretty significant
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increase already
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from 12 to 15 percent to 17 to 20
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percent up till 2022.
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last quarter their their net profit
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margin was only 9
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so they were already trending higher but
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then they adjusted it higher and you can
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actually see a stair step in the chart
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associated with that uh with the the
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ebitda guidance that was ratcheted to
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the upside but but overall it's got a
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gross margin and profitability margin
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profile less than united reynolds which
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is about five times the size of herc
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but i think what we're actually seeing
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here is a potential for margin expansion
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and growth expansion because this is a
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company that doesn't have the same
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scalability and presence that united
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rentals has
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but i think it's becoming a company
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that's a growth story within the uh the
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rental leasing equipment space so
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overall the trends are still moving to
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the upside we're seeing a ratchet a
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ratcheted move and even a margins
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and i think uh as an alternative united
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rentals from a return on equity
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standpoint uh maybe investors see some
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opportunities for market share gains and
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maybe that's why it's higher relative to
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united rentals over the last year and
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its revenue growth by the way is
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trending about uh about 40 percent
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higher than the united rentals around 32
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last quarter versus uri is 18 so it
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seems to be growing a little bit faster
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uh and i think uh it's being rewarded
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from a multiple expansion standpoint by
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investors now if you look at that uh
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from the point of an investor looking at
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these two companies because uri hasn't
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underperformed uh you know the overall
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market that that much at all but if you
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look at it is all based on demand where
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hey herc might be a little bit smaller a
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little bit more nimble maybe not have
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the overhang
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on wage increases and employees
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and things of that nature which are
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going to allow herc to be a little bit
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more nimble and get in there and get
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those higher margins
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i definitely agree with that tom because
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you get a look at you know there's a lot
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of demand for equipment especially when
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it comes down to the environmental
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either remediation waste disposal um you
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know but there's an oil spill out in
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california there's a lot of demand for
[800]
environmental equipment especially when
[801]
it comes to the energy sector and i
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think right now at the margin herc is
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probably getting some additional pricing
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power because of demands uh in the
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energy equipment
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space but also for infrastructure and
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construction all together so
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when you lag your your larger competitor
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a small bump in pricing can certainly
[820]
impact your ebitda margins much greater
[823]
than the larger competitor and i think
[824]
that's why we're seeing outperformance
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in the name but overall
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these two companies are both trending
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well and uh united rentals of course
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being the larger of the two
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but hurricane it looks like to me from
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an outperformance standpoint means that
[837]
they seem to have a little bit more
[838]
margin expansion
[840]
building into them especially after the
[841]
guidance they gave which was a
[843]
considerably higher
[844]
than last quarter's uh
[846]
net profit margins but also they gave
[849]
guidance all the way out to 2022 which
[850]
again
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uh if
[852]
it's a feel-good situation for investors
[854]
and i think that's why we saw that nice
[855]
uh additional move in the last month or
[857]
so
[858]
yeah and i think uh if you take a look
[860]
at that maybe a little bit of profit
[861]
taking today because if you looked at it
[863]
on uh you know maybe a technical basis
[866]
rsi was above 80 it sold off about nine
[870]
bucks from those all-time highs
[871]
throughout the session ended up in the
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red
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but a good performer so far this year an
[876]
outstanding performer so far this year
[879]
all right george that's going to wrap it
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up great breakdown of these overlooked
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stocks appreciate it
[904]
you
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