What a brutal six months it’s been for Hyster-Yale Materials Handling. The stock has dropped 27.8% and now trades at $45.09, rattling many shareholders. This may have investors wondering how to approach the situation.
Is now the time to buy Hyster-Yale Materials Handling, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free .
Even with the cheaper entry price, we don't have much confidence in Hyster-Yale Materials Handling. Here are three reasons why HY doesn't excite us and a stock we'd rather own.
Why Is Hyster-Yale Materials Handling Not Exciting?
Playing a significant role in the development of the hydraulic lift truck, Hyster-Yale (NYSE:HY) designs, manufactures, and sells materials handling equipment to various sectors.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Hyster-Yale Materials Handling’s sales grew at a tepid 5.5% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector.
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Hyster-Yale Materials Handling’s revenue to drop by 5.4%, a decrease from its 10.2% annualized growth for the past two years. This projection doesn't excite us and suggests its products and services will see some demand headwinds.
3. Breakeven Free Cash Flow Limits Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Hyster-Yale Materials Handling broke even from a free cash flow perspective over the last five years, giving the company limited opportunities to return capital to shareholders.
Final Judgment
Hyster-Yale Materials Handling’s business quality ultimately falls short of our standards. After the recent drawdown, the stock trades at 8.5× forward price-to-earnings (or $45.09 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better investments elsewhere. We’d recommend looking at our favorite semiconductor picks and shovels play .
Stocks We Would Buy Instead of Hyster-Yale Materials Handling
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