- The chart shows the performance of industrial manufacturing firm Hillenbrand Inc, over the last 3 years
- Since the stock’s trough in March of 2020, it has risen over 150%
- We have been proponents of investing in companies that make what you need, not what you want.
- Behavioral errors often give investors the feeling that they “missed” a stock after it has risen
- KCR believes that Hillenbrand lies at the intersection of two powerful themes we have highlighted: the opportunity in small-cap value stocks and finding growth at a reasonable price
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Hillenbrand’s Stock Chart: Absolute Return
To see why our proprietary ranking model likes the stock click here. Below the HI stock chart, find some simple reasons why, despite its recent run, the company may be a solid long-term investment.
HI’s Stock Price Relative to the Market: The Case for Investigation
The chart below shows the same chart as the one above. The only difference? The chart below shows HI’s price performance relative to the Russell 2500 over the last three years. Despite the massive run since March 2020, it has lagged both the R2V and the R25 badly.
How badly has the stock underperformed? The chart below shows that if the R2500 just stayed flat, HI would have to rise 26% to catch up with the broad index.
Our models seek to exploit the behavioral errors that turn investors into their own worst enemies. As we explained in our “Enron Hat” piece introducing KCR’s “Glamor Stock Index,” we believe that low-quality stocks propelled by narratives but lacking fundamental merit have created uncommon opportunities like HI today.
The data below is our Single Company Heat Map for HI. For all numbers, higher is better. The basics:
- Valuation Quintile 5: HI is relatively cheap on E/P and S/EV. HI has an 11% FCF/EV which is in the 89th percentile of the Small & Mid Cap Universe.
- Balance Sheet Quintile 5: HI has a solid score on balance sheet quality, and they have increased their dividend steadily over the last 5 years and have a healthy buyback yield.
- Earnings Quality 5: the stock has high-quality earnings with terrific scores on change in inventory relative to sales. The company also has a solid ROE (21%) and ROA (6%).
We have written a second piece with a brief Hillenbrand stock analysis that walks through their terrific Investor Relations material. The firm engages in three primary lines of business. While the development, manufacture, and sale of process solutions molding technology and engineered industrial equipment may sound obtuse, it is a reasonably straightforward story in our view.
If you are interested in another free write-up like this that highlights a stock that offers growth at a reasonable price, take a peek at our piece on Mohawk Industries.
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February 18, 2022 |
| Authors: Matthew Malgari, Nathan Przybylo, Dr. Sanjeev Bhojraj and John Durkin
February 18, 2022
Authors: Matthew Malgari, Nathan Przybylo, Dr. Sanjeev Bhojraj and John Durkin