Buhler Industries Inc (TSX:BUI), a CA$107.25M small-cap, is a machinery manufacturing company operating in an industry, which faces increasing demand of capital equipment and machinery from developing economies in Asia, Latin America and the Middle East. Capital goods analysts are forecasting for the entire industry, an extremely elevated growth of 44.62% in the upcoming year . Today, I’ll take you through the sector growth expectations, as well as evaluate whether Buhler Industries is lagging or leading in the industry. See our latest analysis for Buhler Industries
What’s the catalyst for Buhler Industries’s sector growth?
Machinery manufacturers face the challenge of managing a plethora of new data so that it becomes useful, adapt technology to run their supply chains and operations more efficiently, and build strategic partnerships that will help grow market share. In the past year, the industry delivered growth in the teens, beating the Canadian market growth of 13.27%. Buhler Industries lags the pack with its earnings falling by more than half over the past year, which indicates the company will be growing at a slower pace than its machinery peers. As the company trails the rest of the industry in terms of growth, Buhler Industries may also be a cheaper stock relative to its peers.
Is Buhler Industries and the sector relatively cheap?
Machinery companies are typically trading at a PE of 26.89x, above the broader Canadian stock market PE of 16.28x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a lower 5.51% compared to the market’s 9.22%, which may be indicative of past headwinds. Since Buhler Industries’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Buhler Industries’s value is to assume the stock should be relatively in-line with its industry.
Buhler Industries has been a machinery industry laggard in the past year. If Buhler Industries has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although it delivered lower growth relative to its capital goods peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. However, before you make a decision on the stock, I suggest you look at Buhler Industries’s fundamentals in order to build a holistic investment thesis.
- 1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- 2. Historical Track Record: What has BUI’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Buhler Industries? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.