Regulation is a powerful driver which stimulates non-discretionary purchases throughout the economic cycle. Halma products frequently satisfy demand created by health, safety and environmental legislation. Halma acquires smaller highly cash generative businesses where corporate management practices can further develop innovative products or technologies through the broader Halma distribution network and end markets. To summarize Halma's strategic objective in one sentence, the firm aims to double group revenue and profit every five years via a mix of acquisitions and organic growth. The firm operates approximately 50 businesses in 23 countries with major operations located in Europe, the US and Asia. It operates under four segments, hazard detection, life protection, personal and public health improvement and environmental protection. London listed Halma plc ( OTCPK:HLMLY) is a group of technology companies that makes products for hazard detection and life protection. Given the unique nature of Halma, my analysis focuses on Halma's absolute valuation and investment merits rather than inappropriate comparisons with peers. Halma's well-capitalized balance sheet, non-cyclical demand characteristics and strong management track record leads me to conclude that the risk-return trade off continues to be skewed to the upside. My financial modeling suggests an upside of 35% from current levels. HALMA WATER MANAGEMENT UK DRIVERSTaking into account the structural drivers over the next decade and the firm's historic return on investment profile, the company appears attractively valued when viewed with a longer term perspective. Looking at the headline figures, Halma appears expensive relative to the market in the context of traditional market multiples. To summarize my investment thesis, Halma is a quality company well-positioned for growth over the course of a market cycle benefiting from a number of structural drivers.
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