GTES - Gates Industrial Can Be More Than A Short-Cycle Recovery Story

• Gates offers broad exposure to the auto and short-cycle industrial recovery, with additional upside from R&D-driven efforts to gain share, including replacing chains with belts in multiple industrial power applications.
• Gates generates the bulk of its sales from products where it is among the share leaders and aftermarket revenue is a significant part of the business.
• Margins are not exceptional and leverage is high, but management has been focusing on increasing its R&D productivity and the share of revenue generated by new products.
• While the long-term return potential doesn't look exceptional, the shares do look relatively undervalued on above-average short-cycle sensitivity.

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