ACCO Brands (ACCO) -- Long Idea
- GUARDIAN
- Apr 17
- 5 min read
***At the time this was posted I have been long ACCO as low as sub $2.87 this year and have sent this research brief out and shares have returned nearly 16% since then.
Thesis: Acco Brands (ACCO, $2.94) is currently left for dead due to boring office products (legacy business), yet is pivoting to growth into consumer electronic products and higher ASP at-home and enterprise office products. This isn’t a turnaround story as much as it is a segment mix-shift story. Mgmt has clearly guided they will return to growth in 2H ‘26 doing $.84-$.89/EPS and yet the sellside continues to view them as a legacy office supplies company. So, they’re in a show-me phase of execution. I believe we can get ahead of how they’re really doing and mgmt is sandbagging and the stock rerates off higher earnings. Retained earnings are misleading due to a one-time charge, the leverage is not bad for a company as large as this, and their yield is covered. So, how do we win: 1) even if they cut the yield, stock still rallies as that accelerates deleveraging; 2) let’s assume modest growth, but above street estimates, stock moves off of the beat and raise; 3) low-end of EPS range to midpoint even with a 5x multiple puts the shares attractively higher than today (consumer brands 10-14x, consumer electronics 12-18x). I believe the shares can be worth $.90 in earnings with a 7x multiple, or over $6/share, 100% upside from where it is today. This is a boring idea, but the ability to monitor and track via channel checks and be ahead of data along with the upside makes it an exciting idea.
Allocation: This can be a 1.5-3% position offering opportunity for a starter position on the low end and scale to a full position which has a 1-3x return profile.
KEY STATS & VARIANT OBSERVATIONS
– ADV ~$4.5m | 92m Outstanding | $268 MC | $1.12B EV
– 6x PE | ~7x EV/EBITDA | 10% EBITDA margins
– Revenue down y/y, showing signs of growth sequentially, q/q with continued integration of new brands.
– Downside Risks: Stock trading lower off market (beta), or trading lower until growth returns; yield provides some kind of floor, is covered, but if trimmed, stock may benefit and rally due to accelerating debt pay down which is already very manageable. Biggest risk to the stock would be new segments not growing at the rate they believe and missing numbers, lowering guidance.
COMPANY DESCRIPTION
History: ACCO Brands Corporation is a leading global manufacturer and marketer of branded academic, consumer, and business products. Founded in 1903 as the American Clip Company, it has evolved over a century to become a major supplier of everyday office essentials, school supplies, and technology accessories. Headquartered in Lake Zurich, Illinois, ACCO Brands operates in over 100 countries.
Segments/Product Foci/Brands: ACCO designs, manufactures, and sells products that help people work with productivity, learn with confidence, and play with enjoyment. Their product portfolio is organized into three main areas: 1) Business Essentials: Including brands like Swingline® (staplers), Quartet® (whiteboards), Rexel® (shredders), and Wilson Jones® (binders); 2) Learning & Creative: Including brands like Mead®, Five Star® (notebooks), AT-A-GLANCE® (planners), and Tilibra®; 3) Technology Accessories & Gaming: Including Kensington® (laptop security and accessories) and PowerA™ (gaming controllers).
Key Acquisitions: PowerA, EPOS, and Kensington are the three growth brands management is saying will return the company to growth in the 2H of ‘26. Each of these brands offers higher ASP, higher margins, and are readily purchased in large box retailers, Amazon, or DTC.
Other Details: The roadmap to returning to growth is under the following brands: PowerA which are gaming accessories and can be bought nationwide and licensed with Nintendo (PowerA site). Kensington can be huge for Acco as it’s capturing the work from home transition, but also captures enterprise office TAM as well. Kensington’s site and products can be viewed here. EPOS offers the highest ASP on growing audio category, products can be bought off Amazon, or major retailers and DTC. EPOS’ brand and products can be viewed here.
VARIANT PERCEPTIONS
Left For Dead: Legacy office business still and will continue to generate $80m FCF protecting any payments due along with the yield. The legacy biz is being viewed as what’s killing the company, yet it’s their cash cow to grow elsewhere. So, where the market sees a boring office supply company, we should see great and strong brands in office supplies that are not in high demand, but still have velocity, and are generating cash for the company.
Missclassified. Due to being overlooked and labeled as boring, the company is about to receive a greater % of profits from consumer electronics and accessories, all of which are growing categories, making ACCO more deserving of a low to mid consumer tech accessory multiple.
Durable Earnings. Street views earnings as volatile whereas they are really stabilizing and headed towards expansion. High cash conversion, nearly fixed cost structure, margin expansion coming from growth segments. I believe mgmt is sandbagging their EPS guide and a path to $.90 in EPS in ‘26 and $1+ in ‘27 will not take explosive topline growth to get there.
Call Option: PowerA: Data suggests accessories often grow faster than video game consoles themselves. PowerA’s Nintendo license along with their product lines makes this a large TAM and an embedded call option that ACCO now owns and can be monitored by routine checks online or in stores.
CATALYST / PATH TO PROFITS / TIMELINE
Maintain Margins or Expand: Blended margins should begin to expand by Q3 ‘26. If they don’t, additional revenue from new segments will still add growth and generate cash.
Marketing Creativity: This is conjecture, but many of the new brands offer products which can have a social media presence and catch tailwinds of popular usage and see an increase in sales velocity. Mgmt should be open to creative marketing campaigns given their new products to turn.
Timeline. Mgmt said 2H will generate more revenue for them than 1H, that they’re undergoing some migration items and updates in Q1-2, will still grow MAUs in 1H, but revenue to be higher in 2H.
KEY RISKS
Downside Protected: Stock trading lower off market (beta), or trading lower until growth returns; yield provides some kind of floor, is covered, but if trimmed, stock may benefit and rally due to accelerating debt pay down which is already very manageable. Biggest risk to the stock would be new segments not growing at the rate they believe and missing numbers, lowering guidance.
OVERVIEW OR BRANDS
