Better Clarity On Future Growth Drivers Could Help SPX Flow Take The Next Step

By and large, it's better to invest in the best businesses you can find, but there's a fair price for every going concern, and you can make money with lesser companies if you buy them right. With that in mind, I'd note that SPX FLOW (NYSE:FLOW) shares have outperformed the industrial sector by a decent margin since I recommended them as a "it's not a great company, but it's better than this" pick back in May.

What happens next will have a lot to do with the company's growth investment plans, including how the company chooses to uses the proceeds from its sale of the Power and Energy business. There are solid arguments for reinvesting in and further building businesses like industrial mixers, dehydration equipment, and tools, but management should at least consider expanding into more specialized pump/valve end-markets like biopharma.

With SPX's decent market performance, the shares no longer look as appealing to me. I like the prospect for better growth and margins after the P&E sale, not to mention the flexibility and options the sale may give management, but the valuation is just "okay" now, and I see some near-term risks in both the Food & Beverage and Industrial segments for a few quarters.

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Better Clarity On Future Growth Drivers Could Help SPX Flow Take The Next Step