Stanley Black & Decker Looks Undervalued, But Growth And Margins Are Decelerating

I've said it many times before and I'll say it again - "buying the dip" sounds like great advice, but it can be tough to follow in practice. Outside of market-wide freak-outs (which still require a certain amount of long-term confidence and patience), those dips often come because of issues that don't necessarily look temporary or quickly solvable at the time. And so it is with Stanley Black & Decker (SWK), as the shares are off about 20% from their January high, but there has been a noticeable slowdown in the business and that second-half recovery is not assured.

I'm a little nervous that I'm expecting too much long-term FCF leverage, and there's definitely meaningful downside risk if Stanley Black & Decker can't improve FCF generation from recent levels, but I don't believe my underlying assumptions are all that aggressive and I believe growth in the Tools and Industrial segments can support a higher fair value than today's price offers.

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Stanley Black & Decker Looks Undervalued, But Growth And Margins Are Decelerating