ACCO Brands: An Incredibly Cheap, But Imperfect, Opportunity

Core Viewpoint - ACCO Brands has been underperforming, with declining financial performance, but remains attractively priced relative to peers, suggesting potential for future appreciation [1][8]. Financial Performance - In Q2 of the 2024 fiscal year, ACCO Brands reported revenue of $438.3 million, down 11.2$493.6 million a year prior, with $4.7 million of the decline attributed to foreign currency fluctuations [3][4]. - The decline in revenue was influenced by a 9.2$26.4 million to negative $125.2 million, primarily due to a$165.2 million impairment charge, while adjusted net income slightly increased from $36.5 million to$36.6 million [3][4]. - Gross profit margin improved from 33.3% to 34.8%, aided by cost-cutting measures and moderating product costs [3][4]. - For the first half of 2024, revenue declined by 11% year-over-year, with management forecasting a full-year revenue decline of 8% to 9% and adjusted earnings per share between $1.04 and$1.09 [4][5]. Valuation Metrics - On a price to adjusted net income basis, ACCO Brands is valued at 4.7, making it cheaper than most of its peers, with only one comparable company having a lower EV to EBITDA ratio of 6.1 [5][6]. - The company is positioned as the cheapest among five similar firms on both price to earnings and price to operating cash flow metrics [5][6][7]. - Potential upside scenarios indicate that if ACCO Brands were to trade at the average multiples of its peers, there could be significant appreciation in stock price, with estimates suggesting a doubling or more [7]. Investment Outlook - Despite current challenges, ACCO Brands is considered a soft 'buy' due to its low valuation relative to peers and potential for recovery, although it is not viewed as a strong investment at this time [8].