PLOW - Douglas Dynamics: Market Leader Trading At Near-Trough Multiple On Depressed Earnings

2024-05-24 09:49:09 ET

Summary

• Due to weak demand caused by weather-related challenges, Douglas Dynamics is trading at depressed earnings and a near trough multiple.
• This is creating an opportunity to invest in a business with both a market-leading, stable, and cash-generative segment, and a segment with a history of consistent growth.
• I see a credible case for the stock to reach $35-$40 based on my estimates of FCF growth over the next few years and a 15-20x multiple.
• While these estimates are dependent on favorable weather conditions, I believe the Solutions segment will continue to grow due to commentary from other companies regarding demand from vocational trucking customers.

Douglas Dynamics, Inc. ( PLOW ) is the market leader in snow and ice control equipment for light trucks, owning 50-60% of the market share for these products. It is a premium provider and commands premium prices. Distributors and end users pay up for these products because these products, under the Fisher, Henderson, SnowEx, and Western brands, are known to be high quality and trusted. These operations encompass PLOW’s Work Truck Attachments segment....

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