No Need To Rush On Donaldson

When investors can find a company that earns a great return in a pervasive but low-key industry, they should hang on tight. That certainly would seem to apply to filtration company Donaldson (NYSE:DCI). Not only has Donaldson managed to produce double-digit returns on invested capital on a consistent basis, but the company has also managed to exploit leverage on the free cash flow line; generating a decade of double-digit compound growth off of single-digit sales growth.   

The Quarter That Was
Like a lot of industrial companies, Donaldson had a very solid summer quarter (the company's fiscal fourth quarter). Revenue jumped 22%, as the company's engine product segment grew even faster (up 35%). Profitably was likewise solid across the board - gross margin improved by more than a full point, and the company more than doubled its operating income from the year-ago level. 


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