Wednesday, April 29, 2020

Epiroc In Good Shape Going Into An Uncertain Downturn

All in all, Epiroc (OTCPK:EPOKY) (EPI-A.ST) shares have held up surprisingly well through a period of significant uncertainty and pronounced weakness in equipment orders - and that was before COVID-19 swept around the globe. I thought Epiroc shares had okay, but not great, upside potential back in the summer of last year, after which the share rose more than 20% before a sharp selloff that led to a roughly one-third peak-to-trough move and a subsequent 30% rally. Over that period, Epiroc has been a relative standout, outperforming peers like Caterpillar (CAT), FLSmidth (OTCPK:FLIDY), and Komatsu (OTCPK:KMTUY), though admittedly none of those are apples-to-apples comps.

At this point I still like the company from a business quality standpoint, and the shares are down about 10% from the time of that last article. I expect significant declines in the business in the next couple of quarters, but longer term, I still see this as a quality mid-single-digit grower and a beneficiary of technology adoption across the mining industry. The prospective return isn't superior now, and investors may want to wait in the hope of another pullback, but I'd note that quality companies don't always give investors that ideal margin of safety.

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Epiroc In Good Shape Going Into An Uncertain Downturn

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