Q: What is your opinion of RBA with respect to its long term growth, valuation and as a hedge against a future economic recession. Thanks so much for your help.
5i Research Answer:
RBA has generally been a very strong historical performer. At 23X earnings it is well below its historical valuation averages. The balance sheet is quite leveraged but cash flow is consistent and free cash flow is high. It does not require much capital. It has shown good economic resilience, and remained highly profitable in the pandemic and during the 2008 financial crisis. Its IAA acquisition last year was very large, and was met with skepticism but it is working out. Recent earnings were solid and well ahead of estimates. We think it is attractive today.