With A Sequential Bounce In Orders, Hurco Shifts To A Cyclical Recovery Story

When I last wrote on Hurco (HURC), I said that, "trying to call a bottom in the machine tool space is a good way to look foolish", and so it proved to be, as the rebound I expected in the fiscal fourth quarter (ended October 31) didn't really materialize - orders did improve meaningfully on a sequential basis, but the sequential revenue recovery did not materialize. That said, trends across the machine tool space do seem to be improving, with auto demand stabilizing and some growth in areas like medical, semiconductor, and mold/die.

I'm expecting a couple of years of double-digit sales growth from Hurco as manufacturers in the U.S., Germany, Italy, and other countries see a rebound in demand, but I still only expect the company to outgrow developed country GDP by a very modest amount over the long term. Even so, single-digit FCF margins and a return to low double-digit EBITDA margins should argue for a stock price closer to $40, with a double-digit long-term annualized return opportunity at today's prices.

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With A Sequential Bounce In Orders, Hurco Shifts To A Cyclical Recovery Story