Axalta Coating Systems Ltd. (AXTA): A Bull Case Theory

We came across a bullish thesis  on Axalta Coating Systems Ltd. on Valueinvestorsclub.com by durableadvantage. In this article, we will summarize the bulls’ thesis on AXTA. Axalta Coating Systems Ltd.'s share was trading at $32.38 as of September 8th. AXTA’s trailing and forward P/E were 15.87 and 11.52 respectively according to Yahoo Finance.

Axalta shares have fallen 28% from recent highs and now trade at record-low EBITDA and EPS multiples (excluding COVID panic lows), despite management, appointed in 2023, delivering the strongest earnings growth in the coatings sector. The key concern is recent volume weakness in the refinish business, which generates ~60% of EBITDA. While some investors fear this signals secular decline, insurance claims data points to cyclical pressures, particularly from consumers downgrading coverage amid surging premiums.

Evidence suggests accident frequency remains stable, with liability claims down only low-single digits, and easier comparisons should support improving volumes in 2H25. Axalta’s refinish franchise is uniquely advantaged, with 25% global share, industry-leading technology, high switching costs, and dominance in the premium segment, where it holds 40% share. Despite temporary headwinds from collision claims and elevated total loss rates, growth drivers—price/mix improvements, share gains in mainstream and economy segments, and expansion into adjacencies—remain intact. From 2017 to 2024, refinish revenue compounded 3% annually despite structural headwinds, supported by price gains and acquisitions such as U-POL.

At the group level, EBITDA could grow high single-digits from 2026 as cyclical pressures ease and operational efficiencies compound. A re-rating to historical valuation levels of 10x EBITDA or 15x EPS would imply $41 per share, ~38% upside on consensus 2026 numbers, with further optionality from M&A. BASF’s coatings sale process, expected to value an inferior business at 10–12x EBITDA, could catalyze a reassessment of Axalta’s multiple or spark acquisition interest. With earnings trends likely to improve into 2026, Axalta offers asymmetric risk/reward.

Previously we covered a bullish thesis on Element Solutions Inc (ESI) by celtsfan86 in September 2024, which highlighted its electronics and specialty chemicals focus, strong cash flow, and recovery potential in semiconductors and smartphones. The company’s stock price has depreciated approximately by 5.12% since our coverage as the thesis didn’t fully play out. The thesis still stands with recovery on track. durableadvantage shares a similar view on Axalta but emphasizes valuation upside and M&A catalysts.

Axalta Coating Systems Ltd.  is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 44 hedge fund portfolios held AXTA at the end of the first quarter which was 49 in the previous quarter. While we acknowledge the potential of AXTA as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.