The Brambles Limited (ASX: BXB) share price has increased over 18% since the start of 2019. Brambles' all-time high was $13.79, back in 2007. It was only in December 2016 that the Brambles share price came close to its all-time high, trading at $13.45.
Currently the Brambles share price trades at $11.87 and is well positioned to break its all-time high.
Brambles' third quarter update showed continuing revenue growth.
On Wednesday, Brambles announced its third quarter trading update consisting of solid results. CHEP, a subsidiary of Brambles, showed growth in sales revenue across its America, EMEA and APAC regions.
Currently the FY2019 expectations for Brambles remain unchanged with modest improvements in underlying profit compared to the previous year. However, Brambles expects its cash levels to increase in the second half of 2019 which will provide flexibility for future operations.
Brambles is continuing to improve efficiencies in its business. The global automation and supply chain cost reduction processes appear to be on track. Provided these processes are successfully implemented into Brambles, investors can expect stronger profit margins over the medium term.
In 2018, Brambles announced the sale of its IFCO division which is expected to be completed by the end of FY2019. As previously mentioned by Brambles, the sale of its IFCO division will be used to perform a share buyback of up to US$1.65 billion and to pay down debt.
With Brambles current high debt to equity ratio around 91%, reducing this would improve the health of future financial statements. Similarly, with Brambles performing a share buyback, investors should see an increase in its earnings per share which should warrant a positive reaction from the market.
Brambles currently trades at a PE ratio of 19.55 which is a significant discount to its industry PE equity ratio of 26.14. Factoring in the growth of Brambles earnings per share from the previous financial year, there is value to be found in Brambles' current share price. Additionally, Brambles has organically increased its operating cash flow from the previous year which is likely to continue into subsequent years.
Foolish takeaway
The Brambles share price currently trades at an industry discount with tailwinds for future growth. Provided that Brambles can reduce its current debt levels and improve business efficiency, the Brambles share price should be capable of breaking its all-time high.
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