Owning stocks like Hurco (HURC) – small industrials with no institutional research coverage and too little daily volume to attract a lot of fund managers – can be a frustrating exercise in the best of times. These aren’t the “best of times”, though, as the Street continues to pull back from industrial names, and particularly those leveraged to capex equipment, on fears of peaking orders and margin pressures from supply chain challenges.
To be sure, I do have some concerns about how Hurco will navigate ongoing cost pressures – they’re not doing badly, but costs aren’t letting up. Likewise, orders are annualizing close to prior peaks, so further improvement may be a larger ask.
All of that said, I do still believe there is room for Hurco to log more growth in this cycle, not to mention leverage better volumes into better margins. If Hurco can couple low single-digit long-term revenue growth (in line with developed market capital investment) with modest long-term operating margin improvement, I believe these shares deserve to trade in the $40s, making them a name worth considering today for investors who can accept the risks that go with illiquid cyclical small-caps.
Read the full article here:
Hurco Still Unfollowed And Unloved, But Delivering On Improving End-Market Conditions
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