Shares in global pallet pooling giant Brambles Limited (ASX: BXB) fell 2.9% on Wednesday, sliding significantly further than the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) which fell 0.6%. With no company news contributing to the losses, investors have to search a little deeper to try and explain what led to the selling.
Here are three reasons why Brambles shares might have traded lower.
1) Profit taking. Brambles has been a consistent blue-chip performer. The firm's share price has risen 60% over the past five years – providing nearly 20% of outperformance compared with the S&P/ASX 200 Index. The stock has also significantly outperformed its transport industry peers Toll Holdings Limited (ASX: TOL) and Asciano Ltd (ASX: AIO) over the past five years.
2) Valuation. Brambles shares trade on a hefty price-to-earnings ratio of 22 times. While the company is indeed a standout business, it is struggling to grow at double digit rates which makes such a high multiple questionable and perhaps investors are starting to think unsustainable.
3) Europe. Brambles has significant operations in Europe and as highlighted here, those operations are expanding. With the European Central Bank's monetary policy decision currently taking centre stage as economists fret that the EU could be heading for deflation, it's quite possible that shareholders are also fretting about what the weak EU economy means for Brambles.
