As I have written before, Hurco's (NASDAQ:HURC) size and focus on high-spec machine tools makes it a little more challenging to track relative to large players like DMG Mori Seiki, Okuma,
and so on. Hurco's business isn't driven as directly by large OEMs in
industries like autos and aerospace, but the company is highly sensitive
to exchange rates and the demand for manufacturing in countries like
Germany and Italy. To that end, the significant moves in foreign
currency and the lackluster recent economic performance of Germany have
become bigger headwinds for this small industrial.
It's highly
improbable that Hurco's business is going to shift meaningfully toward
North America anytime soon and it is likewise improbable that this tiny,
thinly-traded stock is going to attract much sell-side attention. That
suggests that investors will have to have some patience to see this work
out as an investment idea, but I believe Hurco is capable of generating
long-term mid-to-high single-digit FCF growth through mid-single digit
revenue growth and modest ongoing margin improvement. That still
supports a fair value in the low-to-mid $40's, though the outlook for
revenue growth in 2015 is such that it may be harder for the stock to
make a lot of headway.
Read more here:
Hurco Waiting On A European Recovery
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