Uni Select Inc. (TSX:UNS), one of North America’s leading distributors of automotive paint and aftermarket parts, released its second-quarter earnings results before the market opened this morning, and its stock has reacted by rallying over 4%. Let’s take a closer look at the results and the fundamentals of its stock to determine if we should buy into this rally, or if we should wait for a better entry point in the future.
Breaking down the rally-igniting results
Here’s a quick breakdown of eight of the most notable statistics from Uni Select’s three-month period ended on June 30, 2017, compared with the same period in 2016:
| Metric | Q2 2017 | Q2 2016 | Change |
| FinishMaster U.S. sales | US$209.49 million | US$196.48 million | 6.6% |
| Canadian Automotive Group sales | US$130.8 million | US$127.28 million | 2.8% |
| Total sales | US$340.29 million | $323.76 million | 5.1% |
| Gross margin | US$102.69 million | US$96.09 million | 6.9% |
| Adjusted EBITDA | US$32.46 million | US$29.74 million | 9.1% |
| Adjusted EBITDA margin | 9.5% | 9.2% | 30 basis points |
| Adjusted earnings | US$16.64 million | US$16.81 million | (1%) |
| Adjusted earnings per share | US$0.39 | US$0.40 | (2.5%) |
What should you do with Uni Select’s stock now?
It was a solid quarter overall for Uni Select, and the results exceeded the consensus estimates of analysts polled by Thomson Reuters, which called for adjusted earnings per share of US$0.36 on revenue of US$337.63 million. The second quarter also topped off a great first half for the company, in which its sales increased 8.5% year over year to $637.49 million and its adjusted EBITDA increased 8.1% year over year to $55.63 million. With all of these statistics in mind, I think the market has responded correctly by sending its stock higher, and I think it still represents an attractive long-term investment opportunity for two primary reasons.
First, it still trades at attractive valuations. Even after the rally of over 4%, Uni Select’s stock trades at less than 21 times fiscal 2017’s estimated earnings per share of US$1.40 and less than 18 times fiscal 2018’s estimated earnings per share of US$1.63, both of which are inexpensive given its current growth rate. The company also expects to close its US$265 million acquisition of The Parts Alliance, the second-largest automotive aftermarket parts distributor in the U.K., in August, and it expects this to immediately be accretive to its adjusted EBITDA and adjusted earnings per share, which will help accelerate its growth going forward.
Second, it’s a great dividend-growth stock. Uni Select currently pays a quarterly dividend of $0.0925 per share, equal to $0.37 per share annually, which gives it a 1.3% yield. A 1.3% yield isn’t high by any means, but it’s important to note that the company has raised its annual dividend payment for three consecutive years, and its 8.8% hike in May has it on pace for 2017 to mark the fourth consecutive year with an increase.
With all of the information provided above in mind, I think Uni Select represents one of the best long-term investment opportunities in the automotive industry today.
