About BrightView
BrightView is a company that surely has been around you at some point or another.
Or perhaps it has sent some of its employees to mow your organization’s lawn, trim its hedges or perform some other type of landscaping on yours or your company’s property.
It’s a small world.
At any rate, that’s what the company specializes in; landscape management.
Although the company may appear to be sort of small as we walk through the company and its core financial figures, make no mistake about it, BrightView is a force in the landscape management industry. In fact, the company is actually the largest landscaping company in the United States and serves a very important role in keeping American homes and businesses both compliant and appealing to the naked eye.
The name of the game (and the primary way in which BrightView generates revenue) is developing contracts with its clients while keeping expenses as low as possible without having to sacrifice quality.
Given that BrightView is the head honcho of the landscaping industry, it only makes sense that the company serves a host of high-profile customers such as municipalities, given that BrightView was the company tasked with recently redeveloping the National Mall, major hotel, casino and resort chains, apartment communities, corporate headquarters complexes of a variety of companies and universities as well, as one of the founding partners of MacroHint recently saw a few BrightView employees working in and around the sprawling campus of the University of Texas at Austin.
While BrightView is the master of laying the groundwork, we’ve also laid some foundations regarding the company which means it’s time to take a closer look at BrightView’s financial health and wellness.
BrightView’s stock financials
Trading at a relatively inexpensive share price of nearly $8, BrightView has a market capitalization of $684.5 million, a price-to-earnings (P/E) ratio of 117.98 all while the company doesn’t currently shell out an annual dividend to its shareholders.
BrightView oddly enough isn’t off to the brightest of starts since although the company’s current share price initially appears to be low, its stock price is still wildly overvalued, given its P/E being well above what is considered to indicate that a stock is trading at fair value, 20.
Although many arguments can be made that BrightView runs a relatively recession proof business model given that regardless of the state of the economy businesses and other organizations need to keep their facilities and the surrounding areas neat and presentable, we certainly aren’t in the mood for buying shares in any company at this massive of a premium.
At least, those are our thoughts thus far.
Let’s dig deeper into the company’s financials, shall we?
Of course we shall.
According to the company’s balance sheet, BrightView’s executive team handles around $3.3 billion in total assets matched with approximately $2.1 billion in total liabilities.
Initially, we projected BrightView’s total liabilities to outweigh its total assets (be it not by a large amount), however, of course we’re alright with being wrong on this one as its total assets hold more weight, at least at the moment, than its total liabilities.
Although we firmly believe costs will continue to rise for BrightView (and other companies across the board) over the next handful of years, we’re fine with the present state and overall outlay of the company’s balance sheet.
Moving onto the company’s income statement, BrightView’s total revenue since 2018 has been exactly what we anticipated; consistent.
BrightView is one of the many companies that is interested in locking in customers for multiple years at a time, or for life, if possible, which makes sense given its revenue has stayed fortified during the brunt of some of the lowest of valleys in the contemporary economy’s history.
Specifically, BrightView’s total revenue in 2018 was around $2.3 billion and has since remained in the same general area code, reported as nearly $2.8 billion in 2022.
For the foreseeable future, or the next five years, we project BrightView’s total revenue to stay parked somewhere between $2.6 billion and $3 billion due to added costs shifted onto their clients, forcing them to pay more if they wish to remain with the company, which many likely will given BrightView’s extensive network and solid reputation throughout the landscaping sector.
Onto the last of the big three financial statements, BrightView’s cash flow statement implies that some years were worse or perhaps more investment intensive than others.
Allow us to briefly explain.
In 2018, the company’s net income stood at a little more than -$15 million whereas the next year BrightView reported net income of $44.4 million.
We attribute this negative figure in 2018 to BrightView acquiring multiple landscape and development companies across the country, which we don’t view as a negative as it was an investment meant to increase the company’s national footprint and generate more revenue over time.
However, in 2020, the company reported a net income of -$41.6 million.
We attribute this primarily to heightened expenses and costs of doing business as well as partially to the company making some more acquisitions during the prior year.
Nevertheless, a nearly -$42 million net income is rather large in comparison to its reported net income in 2018 and speaks a bit to the economic and more prominently, cost sensitivities involved in BrightView’s business.
For instance, the company was hit with increased fuel expenses, raw materials costs, labor costs and other costs that were and still are for the most part completely out of its executive team’s control.
While some years will be better and worse than others moving forward, the plethora of (heightened) costs surrounding this business for the foreseeable future are nothing short of substantial, which is something investors must grapple with if they choose to invest in this company’s stock.
BrightView’s stock fundamentals
Coming into this article, we had little to no clue as to how the margins were in the landscaping business.
Turns out, they aren’t great.
While it’s a positive (but not exactly surprising, at the same time) that BrightView has been able to score a higher trailing twelve month (TTM) net profit margin mildly better than that of the industry’s average, it still doesn’t appear as though landscaping is a business with excessive net profit margins.
If you don’t believe us, that’s alright, just look at the numbers for yourself.
According to TD Ameritrade’s platform, BrightView’s TTM net profit margin stands at a whopping 0.14% while the industry’s average sits at -2.82%.
We really, really don’t like how thin this company’s net profit margin is, however, it appears to be yet another thing that one would need to grapple and deal with if they were intent on investing in the landscape sector.
In addition to the disappointingly yet industry standard low net profit margin, BrightView’s core returns on assets and investment are both lacking as well, as they both trail the industry’s averages by an alarming amount. For instance, BrightView’s TTM returns on assets are 0.12% to the industry’s average of 8.65%.
To us, this implies that BrightView is not generating nearly enough returns through its current workforce and/or tools and equipment, which is another red flag on the play.
Should you buy BrightView stock?
Objectively speaking, many of the numbers and financial figures presented in this stock analysis article indicate that BrightView’s stock isn’t one to get overly ecstatic about.
The company’s stock price is substantially overvalued at the moment, its profit margins are razor thin and its core returns are lackluster, to say the least.
Don’t get us wrong, BrightView serves a very important role in communities all across the United States and we are grateful for it, but as a long-term investment, we’re compelled to pass on this one and focus on deploying investable capital elsewhere.
We give BrightView’s stock a “sell” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.