Monday, July 8, 2013

Investopedia: Stanley Black & Decker Offers Leverage To Construction And Internal Improvements

Investors have already started making moves on the basis of positioning themselves for the expected recovery in U.S. housing, but the leading tool company Stanley Black & Decker (NYSE:SWK) has yet to really go along for the ride. While housing-related stocks like Louisiana-Pacific (NYSE:LPX) and Mohawk (NYSE:MHK) have both nearly doubled over the past two years, Stanley Black & Decker stock is basically where it started.

Some of the lagging performance can be explained with stubbornly low margins and an increasingly debt-heavy balance sheet. At the same time, management has sold some of its housing-related assets and acquired an industrial fasteners business that offers uncertain long-term margins and cash flows at this point. All told, Stanley Black & Decker's stock is a curious proposition – while it is hard to argue that the shares are cheap on the basis of what we've seen recently, a strong recovery in the North American construction market coupled with a return to double-digit free cash flow margins would likely be powerful drivers for the stock.

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