I believe that ROIC is higher since they are acquiring businesses and therefore goodwill is inflated and earnings lower. If one takes the money used to acquire businesses from 2018 to 2022 and divide the increase in earnings over the same period by it, you'd get 25%. Or am I forgoing the investments in organic growth?
Furthermore, my inability to assess the strong and durability of the businesses under its helm withholds me from investing in it. Idk if you have any further inside into the moats of the businesses?
My ROIC calculation is based free cash flow / av. invested capital (which includes goodwill and intangibles). It think it is simply the economics of the business. If you acquire businesses between 4x to 5x EBITDA, you make 20% to 25% ROIC on the acquisition price. TVK has strong market positions in several markets (for ex heating oil tanks), however these are slow or low growth markets fragmented industries which have a limited geography and low competition. I believe is low disruption risk and new competition risk enabling it to continue consolidating. The challenging with such niche markets is that there isn't enough formal market data to prove this point.
All directors and executives together hold 33%. Chairman alone holds 20% of that. So 13% would be the executives together. Not sure about Dustin's specific ownership.
Very informative article! I enjoyed reading it, thank you very much.
Thanks for the good write-up.
I believe that ROIC is higher since they are acquiring businesses and therefore goodwill is inflated and earnings lower. If one takes the money used to acquire businesses from 2018 to 2022 and divide the increase in earnings over the same period by it, you'd get 25%. Or am I forgoing the investments in organic growth?
Furthermore, my inability to assess the strong and durability of the businesses under its helm withholds me from investing in it. Idk if you have any further inside into the moats of the businesses?
My ROIC calculation is based free cash flow / av. invested capital (which includes goodwill and intangibles). It think it is simply the economics of the business. If you acquire businesses between 4x to 5x EBITDA, you make 20% to 25% ROIC on the acquisition price. TVK has strong market positions in several markets (for ex heating oil tanks), however these are slow or low growth markets fragmented industries which have a limited geography and low competition. I believe is low disruption risk and new competition risk enabling it to continue consolidating. The challenging with such niche markets is that there isn't enough formal market data to prove this point.
Great write-up, thanks for sharing. Do you happen to know the CEOs ownership position in the equity?
All directors and executives together hold 33%. Chairman alone holds 20% of that. So 13% would be the executives together. Not sure about Dustin's specific ownership.
Many thanks