LSE:AA.

Stock Analysis Report

Executive Summary

AA plc provides roadside assistance, insurance, and driving services in the United Kingdom.

Rewards

Trading at 47% below its fair value

Earnings are forecast to grow 12.73% per year

Risk Analysis

Interest payments are not well covered by earnings

Unstable dividend track record

Highly volatile share price over past 3 months



Snowflake Analysis

Undervalued second-rate dividend payer.


Similar Companies

Share Price & News

How has AA's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: AA.'s share price has been volatile over the past 3 months.


Market Performance


7 Day Return

21.6%

AA.

-4.6%

GB Consumer Services

0.5%

GB Market


1 Year Return

-36.5%

AA.

7.6%

GB Consumer Services

7.0%

GB Market

Return vs Industry: AA. underperformed the UK Consumer Services industry which returned 7.6% over the past year.

Return vs Market: AA. underperformed the UK Market which returned 7% over the past year.


Shareholder returns

AA.IndustryMarket
7 Day21.6%-4.6%0.5%
30 Day9.8%-8.3%-0.3%
90 Day-16.5%-5.2%0.4%
1 Year-34.6%-36.5%9.0%7.6%12.6%7.0%
3 Year-80.0%-81.7%3.6%-2.0%18.7%3.6%
5 Year-82.6%-84.9%-42.3%-57.7%41.8%9.3%

Price Volatility Vs. Market

How volatile is AA's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is AA undervalued compared to its fair value and its price relative to the market?

47.0%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: AA. (£0.51) is trading below our estimate of fair value (£0.95)

Significantly Below Fair Value: AA. is trading below fair value by more than 20%.


Price To Earnings Ratio

PE vs Industry: AA. is good value based on its PE Ratio (5.8x) compared to the Consumer Services industry average (13.3x).

PE vs Market: AA. is good value based on its PE Ratio (5.8x) compared to the UK market (17.2x).


Price to Earnings Growth Ratio

PEG Ratio: AA. is good value based on its PEG Ratio (0.5x)


Price to Book Ratio

PB vs Industry: AA. has negative assets, so we can't compare its PB Ratio to the GB Consumer Services industry average.


Next Steps

Future Growth

How is AA forecast to perform in the next 1 to 3 years based on estimates from 5 analysts?

12.7%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: AA.'s forecast earnings growth (12.7% per year) is above the savings rate (0.5%).

Earnings vs Market: AA.'s earnings (12.7% per year) are forecast to grow faster than the UK market (12.4% per year).

High Growth Earnings: AA.'s earnings are forecast to grow, but not significantly.

Revenue vs Market: AA.'s revenue (1.7% per year) is forecast to grow slower than the UK market (3.6% per year).

High Growth Revenue: AA.'s revenue (1.7% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: Insufficient data to determine if AA.'s Return on Equity is forecast to be high in 3 years time


Next Steps

Past Performance

How has AA performed over the past 5 years?

8.9%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: AA. has high quality earnings.

Growing Profit Margin: AA.'s current net profit margins (5.4%) are lower than last year (7.2%).


Past Earnings Growth Analysis

Earnings Trend: AA.'s earnings have grown by 8.9% per year over the past 5 years.

Accelerating Growth: AA.'s has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: AA. had negative earnings growth (-24.3%) over the past year, making it difficult to compare to the Consumer Services industry average (52.7%).


Return on Equity

High ROE: AA.'s liabilities exceed its assets, so it is difficult to calculate its Return on Equity.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is AA's financial position?


Financial Position Analysis

Short Term Liabilities: AA. has negative shareholder equity, which is a more serious situation than short term assets not covering short term liabilities.

Long Term Liabilities: AA. has negative shareholder equity, which is a more serious situation than short term assets not covering long term liabilities.


Debt to Equity History and Analysis

Debt Level: AA. has negative shareholder equity, which is a more serious situation than a high debt level.

Reducing Debt: AA.'s has negative shareholder equity, so we do not need to check if its debt has reduced over time.

Debt Coverage: AA.'s debt is not well covered by operating cash flow (10.3%).

Interest Coverage: AA.'s interest payments on its debt are not well covered by EBIT (1.5x coverage).


Balance Sheet

Inventory Level: AA. has a low level of unsold assets or inventory.

Debt Coverage by Assets: AA. has negative shareholder equity (liabilities exceed assets) therefore debt is not covered by short term assets.


Next Steps

Dividend

What is AA's current dividend yield, its reliability and sustainability?

3.96%

Current Dividend Yield


Dividend Yield vs Market

company4.0%marketbottom25%1.9%markettop25%5.2%industryaverage1.9%forecastin3Years4.2%

Current dividend yield vs market & industry

Notable Dividend: AA.'s dividend (3.96%) is higher than the bottom 25% of dividend payers in the UK market (1.95%).

High Dividend: AA.'s dividend (3.96%) is low compared to the top 25% of dividend payers in the UK market (5.2%).


Stability and Growth of Payments

Stable Dividend: AA. has been paying a dividend for less than 10 years and during this time payments have been volatile.

Growing Dividend: AA. has only been paying a dividend for 4 years, and since then payments have fallen.


Current Payout to Shareholders

Dividend Coverage: With its low payout ratio (23.1%), AA.'s dividend payments are well covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: AA.'s dividends in 3 years are forecast to be thoroughly covered by earnings (13.2% payout ratio).


Next Steps

Management

What is the CEO of AA's salary, the management and board of directors tenure and is there insider trading?

2.1yrs

Average management tenure


CEO

Simon Breakwell (54yo)

2.3yrs

Tenure

UK£1,486,000

Compensation

Mr. Simon J. Breakwell serves as the Chief Operating Officer of Trove, Inc. Mr. Breakwell has been the Chief Executive Officer of AA plc since September 26, 2017 and served as its Acting Chief Executive s ...


CEO Compensation Analysis

Compensation vs Market: Simon's total compensation ($USD1.96M) is above average for companies of similar size in the UK market ($USD947.39K).

Compensation vs Earnings: Simon's compensation has been consistent with company performance over the past year.


Management Age and Tenure

2.1yrs

Average Tenure

54yo

Average Age

Experienced Management: AA.'s management team is considered experienced (2.1 years average tenure).


Board Age and Tenure

2.3yrs

Average Tenure

57yo

Average Age

Experienced Board: AA.'s board of directors are not considered experienced ( 2.3 years average tenure), which suggests a new board.


Insider Trading

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Recent Insider Transactions

BuyUK£49,72629 May 19
Simon Breakwell
EntityIndividual
Role
Chief Executive Officer
CEO & Executive Director
Shares83,873
Max PriceUK£0.60
BuyUK£60,21029 May 19
Stephen Barber
EntityIndividual
Role
Member of the Board of Directors
Non-Executive Director
Shares100,000
Max PriceUK£0.60
BuyUK£33,97029 May 19
John Leach
EntityIndividual
Role
Chairman of the Board
Independent Chairman
Shares57,188
Max PriceUK£0.59
BuyUK£71,32009 May 19
Simon Breakwell
EntityIndividual
Role
Chief Executive Officer
CEO & Executive Director
Shares96,444
Max PriceUK£0.74

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Management Team

  • Simon Breakwell (54yo)

    CEO & Executive Director

    • Tenure: 2.3yrs
    • Compensation: UK£1.49m
  • Janet Connor (54yo)

    Managing Director of Insurance

    • Tenure: 0yrs
  • Gareth Kirkwood (55yo)

    Managing Director of Roadside Services

    • Tenure: 2.1yrs
  • Linda Kennedy-Mccarthy

    Chief People Officer

    • Tenure: 0.9yrs
  • Mark Strickland

    Interim Chief Financial Officer

    • Tenure: 0.7yrs
  • Rob Scott (45yo)

    Financial Controller

    • Tenure: 7.9yrs
  • Edmund King (61yo)

    President

    • Tenure: 11.9yrs
  • Ollie Holden

    Chief Information Officer

    • Tenure: 2.1yrs
  • Nadia Hoosen

    Chief Legal Officer & Company Secretary

    • Tenure: 1.4yrs
  • Zeeshan Maqbool

    Head of Investor Relations & Corporate Finance

    • Tenure: 0yrs

Board Members

  • Simon Breakwell (54yo)

    CEO & Executive Director

    • Tenure: 2.3yrs
    • Compensation: UK£1.49m
  • Cathryn Riley (57yo)

    Non-Executive Director

    • Tenure: 1.8yrs
    • Compensation: UK£126.00k
  • Suzi Williams (51yo)

    Non-Executive Director

    • Tenure: 4.2yrs
    • Compensation: UK£95.00k
  • Steve Barber (67yo)

    Non-Executive Director

    • Tenure: 1.5yrs
    • Compensation: UK£61.00k
  • Andrew Blowers (58yo)

    Senior Independent Director

    • Tenure: 2.3yrs
    • Compensation: UK£137.00k
  • John Leach (70yo)

    Independent Chairman

    • Tenure: 2.3yrs
    • Compensation: UK£275.00k
  • Mark David Brooker (48yo)

    Non-Executive Director

    • Tenure: 1.4yrs
    • Compensation: UK£45.00k

Company Information

AA plc's company bio, employee growth, exchange listings and data sources


Key Information

  • Name: AA plc
  • Ticker: AA.
  • Exchange: LSE
  • Founded: 1905
  • Industry: Specialized Consumer Services
  • Sector: Consumer Services
  • Market Cap: UK£311.160m
  • Shares outstanding: 616.16m
  • Website: https://www.theaa.com

Number of Employees


Location

  • AA plc
  • Fanum House
  • Basing View
  • Basingstoke
  • Hampshire
  • RG21 4EA
  • United Kingdom

Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
AA.LSE (London Stock Exchange)YesOrdinary SharesGBGBPJun 2014
2XADB (Deutsche Boerse AG)YesOrdinary SharesDEEURJun 2014
AALBATS-CHIXE (BATS 'Chi-X Europe')YesOrdinary SharesGBGBPJun 2014
AATD.FOTCPK (Pink Sheets LLC)YesOrdinary SharesUSUSDJun 2014

Biography

AA plc provides roadside assistance, insurance, and driving services in the United Kingdom. It operates through two segments, Roadside and Insurance. The company offers breakdowns cover for cars, motorcycl ...


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2019/12/11 22:06
End of Day Share Price2019/12/11 00:00
Earnings2019/07/31
Annual Earnings2019/01/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.