ALFVF - Alfa Laval: Why I Believe The Upside Is Sub-10% Per Year

2024-05-10 14:19:08 ET

Summary

• Alfa Laval's growth potential is not as high as its valuation suggests, particularly due to challenges in its Marine and Food and Water segments.
• The company's recent quarterly results were fairly good, with sales up and order intake slightly down, but margins were lower year-over-year.
• Alfa Laval's future growth is likely to be moderate, with risks including macroeconomic factors and competition in the service business. The stock is currently overvalued.

Dear readers/followers,

Alfa Laval ( ALFVF ) remains an unfortunately premiumized business, seeing growth upside, but not as much as I would consider being relevant given the valuation multiple and the likely returns that investors are likely to see. There's also the ongoing misconception that Alfa Laval is "all safe", which really isn't the case when you consider the company's somewhat troubled Marine division, which is experiencing volatility. Also, the Food and Water segment faces some challenges reflected also in other companies I review in adjacent spaces, such as my recent review of the Norwegian recycling business Tomra ( TMRAY ).

It's time to update on Alfa Laval, a company I last reviewed roughly 5 months ago - and which in that time has slightly outperformed the S&P500, but without dividends is more or less in line with the index. I believe that this has to do with the company's lack of outperformance potential at the current valuation....

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