At Sandvik, Cycle, Value, And Self-Help Are In A Battle Royale

These are challenging times to evaluate almost any industrial company, but Sandvik (OTCPK:SDVKY) (SAND.ST) cranks that to “11” right now. In the plus column, Sandvik has done some very strong work with self-help over the past few years (streamlining supply chains, reducing overhead/fixed costs, culling low-margin business), and a lot of that improvement is acyclical. Sandvik is also benefiting from a strong recovery in mining capex, and has options to further remake the company through M&A. In the minus column, the cutting tool business looks to be rolling over and it’s tough to make headway when your largest, most profitable business is starting to struggle.

If a significant global slowdown is in fact underway (let alone a recession), it’s going to be tough for Sandvik to outperform. Still, I think Sandvik will manage some additional margin leverage from here while keeping its ROIC up in the 20% range, making this a very tempting name even now.

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At Sandvik, Cycle, Value, And Self-Help Are In A Battle Royale