Seeking Alpha: Hurco Disappoints Amidst A Murky Machine Tools Market

There's an old NFL Films clip of Vince Lombardi fuming along the sidelines and yelling out "What the 's goin' on out here?" That encapsulates my feelings about the machine tool market and Hurco's (HURC) place within it. Hurco's limited focus on short-run, high-spec systems reduces the comparability to larger firms like Gildemeister, Mori Seiki (MRSKY.PK), Okuma (OKUMF.PK), and Makino Milling (MKMLF.PK), but it's still frustrating to see the company fail to make progress with its revenue, margins, and order flow.

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Hurco Disappoints Amidst A Murky Machine Tools Market

Seeking Alpha: Hurco Virtually Unknown And Meaningfully Undervalued

Typically when a writer talks about a company being "under-followed" it means that there are no analysts from big name firms following the stock, or that what coverage there is from small retail-oriented shops. In the case of Hurco (HURC), though, there is no coverage.

None.

While this is indeed a small company with a very small float, it doesn't deserve to be completely ignored. Hurco is a small player in the global machine tool industry, but its high-spec tools address a legitimate market opportunity. What's more, the company's margins and returns on capital stack up quite well against some of the giants of the sector. While there is a frustrating cyclicality to this industry, Hurco shares look 30% to 50% undervalued on the basis of a long-term free cash flow model.

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Hurco Virtually Unknown And Meaningfully Undervalued

Seeking Alpha: Earnings Recap - Hurco's Results Surpass Estimates

Hurco (HURC) is a tiny industrial company with almost no coverage, but size and popularity are no barrier to solid performance. Once again Hurco surprised investors with better than expected financial results, and while the company's largest market is seeing tougher conditions, the value in this stock is still worth considering.

Another Solid Quarter
Hurco reported 29% revenue growth for its fiscal first quarter, with Europe leading the way at 41% growth. Sales in North America rose 14%, while sales to Asia-Pacific rose 19% (but are only about 12% of the total). On a unit basis, North America saw 4% growth, while European shipments grew 25%.

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Earnings Recap: Hurco's Results Surpass Estimates