Buhler Industries Inc (TSX:BUI), a CA$103.75M small-cap, operates in the machinery manufacturing industry which follows trends in industrialization and industry base expansion. Machinery manufacturing companies in previously industrialized countries such as the United States or Germany are becoming increasingly more active in providing capital equipment and machinery to developing economies in Asia, Latin America and the Middle East. Capital goods analysts are forecasting for the entire industry, an extremely robust growth of 44.62% in the upcoming year . Should your portfolio be overweight in the machinery sector at the moment? Below, I will examine the sector growth prospects, and also determine whether Buhler Industries is a laggard or leader relative to its capital goods sector peers. Check out 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 previous year, the industry saw growth in the teens, beating the Canadian market growth of 12.45%. Given the lack of analyst consensus in Buhler Industries’s outlook, we could potentially assume the stock’s growth rate broadly follows its machinery industry peers. This means it is an attractive growth stock relative to the wider Canadian stock market.
Is Buhler Industries and the sector relatively cheap?
The machinery sector’s PE is currently hovering around 24.44x, higher than the rest of the Canadian stock market PE of 16.29x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry returned a lower 5.77% compared to the market’s 9.20%, which may be indicative of past headwinds. On the stock-level, Buhler Industries is trading at a higher PE ratio of 2x, making it more expensive than the average machinery stock. In terms of returns, Buhler Industries generated 0.28% in the past year, which is 5.49% below the machinery sector.
Next Steps:Machinery stocks are currently expected to grow faster than the average stock on the index. This means if you’re overweight in this sector, your portfolio will be tilted towards high-growth. However, the sector is also relatively more expensive, which may be reflective of this high growth expectation. If you’re currently concentrated in capital goods, it may be worth revisiting your investment thesis for each stock. 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!