Tuesday, April 21, 2020

Fear Has Pushed Sandvik Back To A More Reasonable Valuation

At least as far European industrials are concerned, analysts have moved swiftly to cut estimates in expectation of a serious recession in the wake of Covid-19, and Sandvik (OTCPK:SDVKY) (SAND.ST) is no exception. Although manufacturing data has held up a little better than feared so far, the second quarter is still likely to be ugly and the sell-side seems braced for an ugly stretch of performance.

Sandvik isn’t my favorite name among European industrials from a quality perspective (that would be Atlas Copco (OTCPK:ATLKY)), and I have some concerns about the long-term growth potential of the core cutting tools business. Even so, the shares would seem to offer a double-digit return on the basis of a 2% to 4% growth rate over the next decade, and that looks like a pretty reasonable risk/reward opportunity.

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Fear Has Pushed Sandvik Back To A More Reasonable Valuation

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