A lot of industrial stocks have strengthened since the election, and Park-Ohio (NASDAQ:PKOH) is no exception with a nearly 40% jump since early November. Unlike a lot of other industrials, though, it may be the case that Park-Ohio's surge hasn't completely captured all of the value from the prospect of improving industrial markets.
Certainly, there are things to be
concerned about here. The company is heavily exposed to the auto sector
and unit volumes in that market may have peaked. The company also has a
large amount of debt relative to its equity and goodwill and intangibles
make up more than 80% of the equity that remains. That said, the
company has shown that it can cut costs quickly when it needs to and
further reductions could offer long-term upside. What's more, management
has shown that it can not only grow by M&A, but can also grow those
businesses once they're in hand. With a fair value in the mid-$40s,
Park-Ohio could still have a little upside to offer investors who are
otherwise frustrated by the valuations in the industrial sector.
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Park-Ohio Holdings May Yet Have Leverage To Future Industrial Improvement