Investors shouldn't expect quality to come cheap, but exactly how much they should pay up for quality is a question with no easy answer, and especially when sentiment on industrial and machinery names is weakening. RBC Bearings (ROLL) is a great company, and one that has long enjoyed a premium valuation, and the acquisition of Dodge from ABB (ABB) only makes this a stronger company in my view.
The "but" is, of course, valuation. The shares look priced for only a mid-single-digit long-term annualized return, but that's also on par with other high-quality industrials like Dover (DOV), Honeywell (HON), and Rockwell (ROK) that also offer leverage to industrial automation and aerospace. The shares also trade at a lower relative EBITDA premium, but the industrial sector is derating, so that approach carries some risk. On balance, I find today's price tempting, but not necessarily compelling.
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