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Fundamental analysis: Driven Brands (#DRVN)

💡 Driven Brands #DRVN is the largest automotive services company in North America with a growing franchise network of more than 4,100 branches in 49 US states and 14 countries. Driven Brands' scalable platform caters to a wide range of vehicle owner needs, including painting, refurbishment, oil change, maintenance and car wash.

⚡️ Key points:

• The automotive services industry is slowly recovering from the negative impact of the pandemic where an increase in miles driven together with an expansion of the most convenient location for car services are driving an increase in costs in the DIFM (do it for me) category.

• Driven Brand has significant growth potential: the company currently has more than 4,100 service points, and plans to open about 1,000 new points by 2024 (CAGR ~ 5%).

#DRVN customer purchasing power, brand awareness, customer relationship, service metrics, and a unified hub of new and established services - deliver 60-67% ROI

• The need for regular maintenance of vehicles ensures constant demand

• Driven Brands' structure, despite high fixed costs, has unified services platform and scalable business model that are expected to increase business profitability. Taking all these factors into account, the company could significantly outperform its adjusted net profit margin forecast (15-19%).

📖 Financial indicators:

  • Earnings vs Market: DRVN is forecast to become profitable over the next 3 years, which is considered above average market growth.

  • Revenue vs Market: DRVN's revenue (17.5% per year) is forecast to grow faster than the US market (10.1% per year).

  • Short Term Liabilities: DRVN's short term assets ($366.6M) exceed its short term liabilities ($296.1M).

  • Long Term Liabilities: DRVN's short term assets ($366.6M) do not cover its long term liabilities ($3.1B).

  • Debt Level: DRVN's debt to equity ratio (193.6%) is considered high.

👉🏻 JPM reaffirms Buy recommendation and raises target price.

✅ Driven Brands #DRVN

🎯 Target price - $ 39, upside potential + 43%.

OTB Global Investments

London, 10 March 2021

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