It's been a tough year for the Seven Group Holdings Ltd (ASX: SVW) share price. Seven shares are now down a painful 20.2% year to date in 2022 thus far, not helped by the 0.56% the company has currently lost this Monday.
The S&P/ASX 200 Index (ASX: XJO) has not had a top year so far in 2022 of course. The ASX 200 remains down by more than 7.5% over this year so far. But the Seven share price has still performed far worse than that.
It's even worse if we zoom out a little. Over the past 12 months, Seven shares have gone backwards by close to 27%. The company also remains around 15% from the all-time high of $24.55 that we saw back in August 2021.
So with all of these nasty falls under the belt, what might be next for the Seven share price. Is the diversified company a case of a falling knife, or a value investor's dream?
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Are Seven Group shares a buy today?
Well, according to one expert investor, it is unequivocally the latter. Joe Wright of Airlie Funds Management recently penned a piece for Livewire, in which he argued that Seven shares are currently going for "a price we believe is more than fair".
Wright points to the fact that three of Seven's key underlying businesses are quality businesses undervalued by the markets. They are Caterpillar dealer WesTrac, equipment renter Coates, and construction company Boral Limited (ASX: BLD).
Wright calls all three of these businesses "quality businesses that we believe are undervalued by the market".
Let's go through them.
Seven's trifecta of growth?
So with WesTrac, Wright points out that it is the exclusive dealer of the heavy industrial vehicles maker Caterpillar in several states:
It's the earnings visibility of WesTrac alongside the strong returns that come as a function of its privileged competitive position that make the business a standout for us in the mining services sector.
In Coates' case, Wright says that it has scale, a trusted brand, management with an "exceptional track record: and top-notch operating metrics." He also pointed out that Coates was able to double its earnings between 2015 and 2021 from $100 million to $212 million, even though it only increased its sales by $25 million:
It's the strong track record of management, the market-leading position and a robust earnings outlook that makes Coates attractive to us as at Airlie.
Boral is an interesting one. The construction materials company is still listed on the ASX in its own right. But Seven has managed to amass a 70% stake in the company.
This, Wright says, forms "the majority of our Seven Group valuation". He names Boral's opportunity to lift margins as a reason to be bullish on this company, as well as Boral's "extensive portfolio of surplus property".
All in all, this is why Airlie's Joe Wright is so bullish on the Seven Group share price at the moment. No doubt this will be music to shareholders' ears. So let's see what the first of 2022 brings for Seven Group shares.
