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Brief Commentary On Alamo Group Inc.'s (NYSE:ALG) Fundamentals

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As an investor, I look for investments which does not compromise one fundamental factor for another. By this I mean, I look at stocks holistically, from their financial health to their future outlook. In the case of Alamo Group Inc. (NYSE:ALG), it is a financially-robust company with a strong history of performance, trading at a great value. In the following section, I expand a bit more on these key aspects. For those interested in understanding where the figures come from and want to see the analysis, read the full report on Alamo Group here.

Undervalued with proven track record

In the previous year, ALG has ramped up its bottom line by 59%, with its latest earnings level surpassing its average level over the last five years. Not only did ALG outperformed its past performance, its growth also exceeded the Machinery industry expansion, which generated a 30% earnings growth. This paints a buoyant picture for the company. ALG's ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This implies that ALG manages its cash and cost levels well, which is a key determinant of the company’s health. ALG’s debt-to-equity ratio stands at 35%, which means its debt level is reasonable. This means that ALG’s capital structure strikes a good balance between low-cost debt funding and maintaining financial flexibility without overly restrictive terms of debt.

NYSE:ALG Income Statement, July 4th 2019
NYSE:ALG Income Statement, July 4th 2019

ALG is currently trading below its true value, which means the market is undervaluing the company's expected cash flow going forward. This mispricing gives investors the opportunity to buy into the stock at a cheap price compared to the value they will be receiving, should analysts' consensus forecast growth be correct. Also, relative to the rest of its peers with similar levels of earnings, ALG's share price is trading below the group's average. This further reaffirms that ALG is potentially undervalued.

NYSE:ALG Intrinsic value, July 4th 2019
NYSE:ALG Intrinsic value, July 4th 2019

Next Steps:

For Alamo Group, there are three relevant factors you should further research:

  1. Future Outlook: What are well-informed industry analysts predicting for ALG’s future growth? Take a look at our free research report of analyst consensus for ALG’s outlook.

  2. Dividend Income vs Capital Gains: Does ALG return gains to shareholders through reinvesting in itself and growing earnings, or redistribute a decent portion of earnings as dividends? Our historical dividend yield visualization quickly tells you what your can expect from ALG as an investment.

  3. Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of ALG? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.

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