DCI - Donaldson: Good Growth Prospects And A Discounted Valuation

2024-06-12 09:55:01 ET

Summary

• DCI expected to see growth in all three segments: Mobile Solutions, Industrial Solutions, and Life Sciences.
• Margins to benefit from operating leverage, price increases, and moderating cost inflation.
• Valuation is lower than the historical average, making DCI stock a good buy.

Investment Thesis

Donaldson Company, Inc. ( DCI ) should see good growth across its three segments moving forward. In the Mobile Solutions segment, revenues should benefit from the conclusion of inventory destocking in the aftermarket business, easy comparisons, and market share gains. Further, the Industrial Solutions segment should see good revenue growth driven by market share gains from its "create, connect, replace, and service" strategy and strength in the aerospace and defense end markets. Lastly, the Life Sciences segment's revenue growth should improve, supported by demand recovery in the disk drive and bioprocessing businesses. Besides organic growth, the company should benefit from potential bolt-on M&As given its strong balance sheet with a net debt/EBITDA of ~0.5x....

For further details see: