Q: You have previously stated the current price is good entry point for SJ. Given the political climate in the US and the threat of tariffs, would you consider this a buy right now or would you hold off?
5i Research Answer:
SJ saw its price decline recently on weak earnings, and it has also been seeing some weakness alongside the broader markets. It trades at a decent valuation of 12.9X forward earnings, but forward growth estimates are in the low single digits, and analyst estimates have been trending lower. Regardless, it generates good free cash flow, has a decent debt profile, a growing balance sheet, and historical growth rates have been strong. While it could see further weakness based on tariffs and a weaker growth profile, we would be comfortable slowly averaging in here given its solid valuation, high drawdown (30% in the past few months), and long-term strength in management and fundamentals.