Hardies is a very good business. But the challenge is trying to work out what normalised earnings are, or should be. The pandemic resulted in a housing boom. If JHX is over-earning by 20%, that headline PE is very misleading (in other words, despite having sold off, and hard, it would still be expensive relative to the market).

US housing should slow with rising mortgage rates, and we are already seeing clear evidence of such a slow down.


BRG is the same. Your eyes can look at the below in two quite convincing ways. a) cyclical, but grinding positive sales growth as a general trend pre-COVID, or b) exceptional growth that’s reached critical scale when viewed over the whole series. We think a) is more likely than b).

But in fairness, you could split that commentary (the a and the b perspective) over the segments quite reasonably (more valid for distribution say, than global product).

On the whole though, if it is over-earning…


…and is carrying too much inventory…

…well, you’d want to make sure you’re not paying too much on a normalised basis. How much is too much?

25x earnings for a coffee machine maker that could well be on >30x normalised earnings seems like too much.

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