Loomis AB, the Swedish cash handling giant, just released its first quarter results for 2024. On the surface, it was a quiet quarter, with modest revenue growth and a slight dip in earnings per share. But beneath the calm exterior, a signal is flashing, one that many analysts seem to be missing. This signal suggests that Loomis AB, a company already dominant in its field, might be on the verge of a significant breakout.

The Working Capital Clue

The key lies in Loomis AB's change in working capital. For those unfamiliar with this financial metric, working capital essentially represents the difference between a company's current assets (things like cash, accounts receivable, and inventory) and its current liabilities (short-term debt, accounts payable). It's a measure of a company's short-term financial health and its ability to meet its immediate obligations.

A negative change in working capital, like the -SEK 29,514,400 recorded by Loomis AB this quarter, might initially seem alarming. It could signal a company struggling to manage its cash flow or facing difficulties collecting payments. However, in the context of Loomis AB's overall financial picture, this negative change could be anything but bad news. It could actually be the prelude to an aggressive growth strategy, one fueled by the company's remarkable cash position.

A Mountain of Cash

This cash stockpile, combined with the company's consistently strong free cash flow, suggests that Loomis AB is gearing up for something big. The company has a history of strategic acquisitions, expanding its reach and solidifying its position as a global leader in cash handling. Could this negative change in working capital be a sign that Loomis AB is preparing to deploy its vast resources on a game-changing acquisition, one that could catapult the company to even greater heights?

Ripe for Consolidation

The evidence points in that direction. Loomis AB operates in a fragmented market, ripe for consolidation. The company has a proven track record of successful integration and a deep understanding of the intricacies of cash handling across diverse geographical and regulatory landscapes. With digital payment methods gaining traction, the need for secure and efficient cash management solutions remains paramount. Loomis AB is ideally positioned to capitalize on this trend, and a strategic acquisition could significantly accelerate its growth trajectory.

Hypothetical Acquisition Scenario

Consider this hypothetical scenario: Loomis AB, with its deep pockets, identifies a promising cash handling company in a high-growth region like Southeast Asia. This acquisition not only expands Loomis AB's geographical footprint but also allows it to tap into a new customer base and leverage existing infrastructure. The initial investment might cause a dip in working capital, but the long-term benefits in terms of revenue growth, market share, and profitability could be substantial.

Beyond Acquisitions

It's important to note that this is just one possible scenario. Loomis AB could also choose to invest its cash in other growth initiatives, such as expanding its Loomis Pay platform or developing innovative cash handling technologies. However, the signal is clear: Loomis AB is not content to rest on its laurels. The company is poised for action, and investors who recognize this hidden signal might be handsomely rewarded in the coming months and years.

Cash Flow Growth

The following chart shows the free cash flow of Loomis AB over the past few years, indicating a strong and consistent ability to generate cash.

"Fun Fact: Loomis AB has a history that dates back to the California Gold Rush of 1852, when its founder, Walter Loomis, established a stagecoach company to transport gold and other valuables. This heritage underscores the company's enduring commitment to secure and reliable cash handling solutions."