{"id":111106,"date":"2021-11-12T11:45:00","date_gmt":"2021-11-12T16:45:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=111106"},"modified":"2022-11-21T09:49:17","modified_gmt":"2022-11-21T14:49:17","slug":"this-company-has-the-tools-to-outperform","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/stocks\/this-company-has-the-tools-to-outperform\/","title":{"rendered":"This Company Has the Tools to Outperform"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">With deep customer relationships and innovative solutions for future equipment needs, this global supplier has a durable business ready for a changing industry. Snap-on Services Corp (SNA: $206\/share) remains a&nbsp;<a href=\"https:\/\/www.newconstructs.com\/category\/stock-plays-of-the-week\/\" target=\"_blank\" rel=\"noreferrer noopener\">Long Idea<\/a>&nbsp;after 3Q21 earnings.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"https:\/\/www.newconstructs.com\/evidence-on-the-superiority-of-our-earnings-data\/\">We leverage more&nbsp;reliable fundamental data<\/a>, as proven in&nbsp;<a href=\"https:\/\/www.sciencedirect.com\/science\/article\/abs\/pii\/S0304405X21001550\" target=\"_blank\" rel=\"noreferrer noopener\">The Journal of Financial Economics<\/a><a href=\"https:\/\/www.newconstructs.com\/this-company-has-the-tools-to-outperform\/#_ftn1\">[1]<\/a>, and shown to provide a&nbsp;<a href=\"https:\/\/www.newconstructs.com\/alpha-from-earnings-distortion\/\" target=\"_blank\" rel=\"noreferrer noopener\">new source of alpha<\/a>, with qualitative research to highlight this firm whose stock present excellent risk\/reward.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-snap-on-has-very-attractive-risk-reward\"><strong>Snap-on Has Very Attractive Risk\/Reward<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">We made Snap-on a Long Idea in&nbsp;<a href=\"https:\/\/www.newconstructs.com\/better-profits-than-meet-the-eye\/\" target=\"_blank\" rel=\"noreferrer noopener\">February 2018<\/a>&nbsp;and the stock has underperformed the market by 39% since then. However, given the company\u2019s strong market position and cheap valuation, we continue to see upside in the stock.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Figure 1: Long Idea Performance: From Date of Publication Through 10\/26\/2021<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"630\" height=\"292\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2021\/11\/nc_11-12-21_1.png\" alt=\"Performance: From Date of Publication Through 10\/26\/2021\" class=\"wp-image-111107 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2021\/11\/nc_11-12-21_1.png 630w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2021\/11\/nc_11-12-21_1-300x139.png 300w\" data-sizes=\"(max-width: 630px) 100vw, 630px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 630px; aspect-ratio: 630\/292;\" \/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Sources: New Constructs, LLC and company filings<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What\u2019s Working:&nbsp;<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Snap-on beat on both its top and bottom lines in 3Q21. Total revenue in 3Q21 rose 10% year-over-year (YoY) and is 15% above 3Q19 levels. The company\u2019s Commercial and Industrial segment (30% of revenue in 3Q21), which expands its offerings beyond traditional auto tools and into the aerospace, power generation, and military markets, also showed signs of continued recovery from the pandemic as the segment\u2019s revenue was up 11% YoY from 3Q20.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">While other businesses with more complex supply chains may struggle to maintain inventory levels, Snap-on\u2019s vertically integrated business enables it to better navigate the current global challenges. Snap-on\u2019s available inventory during the supply crunch is an advantage that will help the company keep existing customers and effectively compete for new ones as other tool and equipment suppliers struggle to maintain desired inventory levels. Management spoke to the company\u2019s advantageous supply chain position in its&nbsp;<a href=\"https:\/\/seekingalpha.com\/article\/4461274-snap-on-incorporated-sna-ceo-nick-pinchuk-on-q3-2021-results-earnings-call-transcript\" target=\"_blank\" rel=\"noreferrer noopener\">3Q21 earnings call<\/a>&nbsp;when it mentioned that its vertically integrated business, \u201ccertainly puts us in a better position to grow and probably capture new customers who might not be serviced by these people (i.e. competitors).\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Snap-on benefits from long-term demand in the automotive repair industry as it supplies auto service technicians, auto service centers, and car dealerships with tools, equipment, and diagnostic tools. For years, the average age of vehicles on the road in the U.S. has steadily increased, which creates more repair opportunities for service providers. The&nbsp;<a href=\"https:\/\/www.cnbc.com\/2021\/09\/28\/cars-on-american-roads-keep-getting-older.html\" target=\"_blank\" rel=\"noreferrer noopener\">average age of a vehicle<\/a>&nbsp;in 2021 of 12.1 years is up from 11.9 years in 2020.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The proliferation of driver assistance systems provides more runway for Snap-on\u2019s diagnostic segment over the long run as demand for third-party repairs and system calibrations rise. Snap-on is already meeting this demand by offering diagnostic platforms that give repair shops the ability to make manufacturer-compliant calibrations to driver assistance systems.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"https:\/\/www.newconstructs.com\/this-company-has-the-tools-to-outperform\/\">Click here to read the full article<\/a><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&#8212;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>This article originally published on&nbsp;<\/em><a href=\"https:\/\/www.newconstructs.com\/this-company-has-the-tools-to-outperform\/\" target=\"_blank\" rel=\"noreferrer noopener\"><em>October 27, 2021<\/em><\/a><em>.<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme.<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Follow us on&nbsp;<\/em><a href=\"https:\/\/twitter.com\/NewConstructs\" target=\"_blank\" rel=\"noreferrer noopener\"><em>Twitter<\/em><\/a><em>,&nbsp;<\/em><a href=\"https:\/\/www.facebook.com\/newconstructsllc\/\" target=\"_blank\" rel=\"noreferrer noopener\"><em>Facebook<\/em><\/a><em>,&nbsp;<\/em><a href=\"https:\/\/www.linkedin.com\/company\/new-constructs\" target=\"_blank\" rel=\"noreferrer noopener\"><em>LinkedIn<\/em><\/a><em>, and&nbsp;<\/em><a href=\"https:\/\/stocktwits.com\/dtrainer_NewConstructs\" target=\"_blank\" rel=\"noreferrer noopener\"><em>StockTwits<\/em><\/a><em>&nbsp;for real-time alerts on all our research.<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"https:\/\/www.newconstructs.com\/this-company-has-the-tools-to-outperform\/#_ftnref1\">[1]<\/a>&nbsp;Our research utilizes our&nbsp;<a href=\"https:\/\/www.newconstructs.com\/education-core-earnings-earnings-distortion\/\" target=\"_blank\" rel=\"noreferrer noopener\">Core Earnings<\/a>, a more reliable measure of profits, as proven in&nbsp;<a href=\"https:\/\/www.newconstructs.com\/its-official-we-offer-the-best-fundamental-data-in-the-world\/\" target=\"_blank\" rel=\"noreferrer noopener\">Core Earnings: New Data &amp; Evidence<\/a>, written by professors at Harvard Business School (HBS) &amp; MIT Sloan and published in&nbsp;<a href=\"https:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=3467814\" target=\"_blank\" rel=\"noreferrer noopener\">The Journal of Financial Economics<\/a>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"https:\/\/www.newconstructs.com\/wp-content\/uploads\/sites\/2\/2021\/10\/LongIdea_EarningsUpdate_SNA_2021_10_27.pdf\" target=\"_blank\" rel=\"noreferrer noopener\"><em>Click here to download a PDF of this report<\/em>.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Snap-on beat on both its top and bottom lines in 3Q21. Total revenue in 3Q21 rose 10% year-over-year (YoY) and is 15% above 3Q19 levels. <\/p>\n","protected":false},"author":348,"featured_media":111107,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[6,8,9,22,26,3],"tags":[10637],"contributors-categories":[13616],"class_list":["post-111106","post","type-post","status-publish","format-standard","has-post-thumbnail","category-north-america","category-region","category-securities","category-stocks","category-text-articles","category-traders-insight","tag-snap-on","contributors-categories-new-constructs"],"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v28.5) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>This Company Has the Tools to Outperform | Traders&#039; Insight<\/title>\n<meta name=\"description\" content=\"Snap-on beat on both its top and bottom lines in 3Q21. 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