The Motley Fool

Why Element Fleet Management Corp. Is Down Over 32%

What?

Fleet management company Element Fleet Management Corp. (TSX:EFN) is down over 32% as of 12:20 P.M. EST today in response to a press release late Monday in which it provided an update regarding its strategic priorities, announced the retirement of its CEO, and provided its financial outlook.

So what?

It seems as if Element stuffed as much information into one press release as it possibly could, so let’s go over each piece one by one.

First, the company provided an update on its strategic priorities, in which it stated that it completed its review and its “broad spectrum of alternatives,” and concluded that “the best way to create long-term value for all stakeholders is to continue to execute on its strategy and remain focused on its customers, efficiency, and the effectiveness of its operations.”

Second, Element announced that after over five years with the company, its CEO and director Bradley Nullmeyer will be retiring from his positions, effective immediately. The company’s board of directors stated that it is conducting a search for its new CEO, both internally and externally, and that its current president and chief operating officer Dan Jauernig will be its interim CEO.

Third, the company provided its financial outlook, which included the expectation for “integration challenges” to lead to core fleet adjusted operating income being down 3% to 5% in 2018, but it added that it “remains confident in mid- and long-term core fleet adjusted operating income growth rate of 7% to 9% in 2020 and beyond.”

Now what?

Needless to say, investors were disappointed in this release, because I think they were hoping for the strategic review to lead to a sale of the company, and the negativity piled on when it announced the leadership change and provided its dismal outlook; that being said, I think the weakness in its stock is warranted, but I also think it’s a bit overdone at over 30%.

Element’s stock now trades at more attractive valuations, including a mere 6.1 times fiscal 2018’s estimated earnings per share of $0.88, which is very inexpensive given its recent growth rates, and it has the added benefit of a juicy 5.6% yield; with these factors in mind, I think Foolish investors who are okay with a little risk should take a closer look and consider using the steep sell-off in Element Fleet Management to begin scaling in to long-term positions.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

Fool contributor Joseph Solitro has no position in any stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.