Wednesday, January 22, 2014

Seeking Alpha: Rotork Has All The Quality You Could Want

I'm not sure how a reader could fault Rotork (OTC:RTOXY) on the basis of quality. This British industrial company has established leading market share in valve actuators (devices fitted to valves to control them, and the flow of fluid and gas), and actually grew through the 2009 downturn when most industrial companies were seeing significant pressure in their business. Rotork has not just grown, it has grown profitably, with a five-year average return on invested capital over 30%.

Quality isn't the issue with Rotork, but valuation might be. I readily admit that high-quality companies often get and hold a premium multiple. Rotork is also looking to redefine its business once again and expand its addressable market by about a third in the process. I'm not recommending betting against Rotork, but the market already seems to be counting on 10% annual free cash flow growth for the next decade and there are cheaper industrials out there right now.

Read more here:
Rotork Has All The Quality You Could Want

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