Eaglestone Capital
Comfort from the Heat
Construction Industry - Comfort Systems USA | 6.17.24
Comfort Systems USA is Cool
This week we’re digging into the U.S. construction sector. Why? The most recent economic data from April 2024 points to continued strength in construction spending - whether its the 11.4% annual growth in single family housing starts, the 8.1% annual growth in residential construction spending or the 11.5% annual growth in non-residential construction spending.
Comfort Systems (NYSE:FIX) based in Houston, TX is focused on the new build commercial & industrial heating ventilation and air conditioning (HVAC) services market. FIX has been growing rapidly - in 1Q2024 revenues increased 31% year over year (YoY) and operating income increased 91% YoY.
At Eaglestone Capital, we love companies that earn high returns on capital employed (ROCE) while growing earning per share (EPS) and compounding book value. Over the past year, FIX grew EPS 78% and book value per share 30% while growing ROCE from 19.6% to 29.1% over the past year.
Shelter from the Storm
P&C Insurance - Kinsale Capital | 6.7.24
Every Dog Has His Day
While Nvidia grew earnings and book value per share at compound annual growth rates of 55% and 30% respectively over the past 9 years (impressive!), we’ve been thinking about how attractive the U.S. P&C insurance industry has been for the past few years.
Take Kinsale Capital (KNSL) for example. The Virginia-based specialty P&C insurance company only underwrites smaller risks within the E&S market. The management team has grown EPS and book value per share at a CAGR of 36% and 26% over the past year while the shares have appreciated at a CAGR of 47%.
Retire Rich & Happy
Retailer in the Spotlight - Lululemon | 6.7.24
Lululemon Steals the Show
At Eaglestone Capital, we love companies that earn high returns on capital employed (ROCE) while growing earning per share (EPS) and compounding book value. Case in point, Lululemon (LULU) reported this week that it has grown EPS 7.2x, grown book value 4.5x and grown ROCE 44% over the past 9 years while their share price has compounded at an annual rate of 20% (returned 5.1x the original share price). As of June 5, 2024, the Company had approximately $1.7 billion remaining authorized under its stock repurchase program.
