Shareholders of WillScot Mobile Mini would probably like to forget the past six months even happened. The stock dropped 22.1% and now trades at $17.68. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Is there a buying opportunity in WillScot Mobile Mini, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think WillScot Mobile Mini Will Underperform?
Despite the more favorable entry price, we're sitting this one out for now. Here are three reasons you should be careful with WSC and a stock we'd rather own.
1. Revenue Tumbling Downwards
We at StockStory place the most emphasis on long-term growth, but within industrials, a stretched historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. WillScot Mobile Mini’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 1.8% over the last two years. 
2. Shrinking Operating Margin
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Analyzing the trend in its profitability, WillScot Mobile Mini’s operating margin decreased by 10.5 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its operating margin for the trailing 12 months was 8%.
3. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for WillScot Mobile Mini, its EPS declined by 1.6% annually over the last five years while its revenue grew by 10.8%. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
We see the value of companies helping their customers, but in the case of WillScot Mobile Mini, we’re out. Following the recent decline, the stock trades at 16.7× forward P/E (or $17.68 per share). While this valuation is reasonable, we don’t see a big opportunity at the moment. There are better stocks to buy right now. We’d suggest looking at our favorite semiconductor picks and shovels play.
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