Brink's Company: A Contrarian Play on High-Margin Growth Amid Short-Term Headwinds

The Brink's Company (BCO) stands at an intriguing crossroads. Despite recent volatility tied to macroeconomic and regional headwinds, its ATM Managed Services (AMS) and Digital Retail Solutions (DRS) divisions are delivering 20%+ organic growth for four consecutive quarters, fueling a 64% five-year EPS CAGR. This momentum, paired with a sustainable dividend yield and a total shareholder return (TSR) of 108% over five years, suggests the stock is pricing in short-term noise while overlooking its durable competitive advantages. Let's unpack why BCO could be a compelling contrarian investment today.

The Growth Engine: AMS/DRS Dominance

Brink's is undergoing a strategic transformation. Its AMS/DRS segment, which now accounts for 25% of total revenue, is the clear driver of growth. In Q1 2025, the segment contributed 80% of organic revenue growth, with incremental operating margins of 30%—far higher than traditional cash-in-transit (CIT) services. This shift toward recurring revenue streams (e.g., ATM management, DRS conversions for retailers) is paying off:

• North America: DRS installations in auto parts and restaurant sectors are expanding.
• Europe: DRS now accounts for 42% of revenue, driven by grocery and convenience store conversions.
• Rest of World: Precious metal logistics are booming, with 9% organic growth in Q1.

The 2025 target of 25-27% revenue from AMS/DRS is on track, and management expects margin expansion of 30-50 basis points in 2025. While AMS growth may be lumpy (due to large-scale deployments), acceleration is expected in H2 2025, further solidifying the segment's role as a cash flow machine.

Short-Term Challenges: Temporary, Not Fundamental

Critics point to headwinds like Latin America's 8% revenue decline (due to currency headwinds) or a 746% drop in Q4 2024 GAAP EPS (driven by DOJ/FinCEN resolution charges). However, these are transient issues:

1. Currency Volatility: Latin America's struggles are constant-currency neutral (8% growth there in Q1), and the segment's revenue mix is improving.
2. One-Time Charges: The $1.02 EPS hit from 2024's resolution is now behind the company, freeing up resources for core operations.
3. Global Diversification: Brink's has a balanced geographic footprint, with Europe and North America offsetting weaker regions.

The stock's recent dip (down 15% in the past year vs. a market upswing of 12%) reflects these temporary factors, not the long-term health of its high-margin business.

EPS Growth vs. Stock Performance: A Disconnect

While Brink's has delivered a 64% five-year EPS CAGR, its stock price has lagged, rising just 14% annually over the same period. This gap creates an opportunity:

• Dividend Boost: Total returns (including dividends) hit 108% over five years, with a 1.14% dividend yield (near a one-year high) and a 15% payout ratio—comfortably sustainable.
• Margin Momentum: AMS/DRS's higher margins are driving EBITDA improvements. North America's Q1 EBITDA margin hit a record high, signaling operational efficiency gains.

Investment Thesis: Buy the Dip, Bet on Margin Expansion

Brink's is a contrarian play for three reasons:

1. Valuation: At 10x forward P/E (vs. a five-year average of 15x), the stock is pricing in worst-case scenarios.
2. Free Cash Flow: Targeting 40-45% conversion (up from 30% in 2020) supports buybacks and dividends.
3. Long-Term Tailwinds: The shift to recurring revenue is structural. With mid-teens organic growth targets for AMS/DRS and a 30%+ incremental margin profile, BCO is well-positioned to outperform in any economic cycle.

Conclusion: A Buy for Patient Investors

Brink's is not without risks—currency swings and lumpy AMS deployments could cause volatility. But the fundamentals are strong: a 20%+ growth engine, margin expansion, and dividend resilience all point to undervaluation today. For investors willing to look past near-term noise, BCO offers a rare blend of value and growth. With shares down sharply in 2025, this could be the ideal time to buy the dip and lock in a high-margin winner.