COVID-19 Brings Komatsu Back To More Reasonable Levels

There are ample concerns about both the construction and mining end-markets now, and that can be seen in Komatsu's (OTCPK:KMTUY) 20% year-to-date share price decline, a decline more or less on par with Caterpillar (CAT) but worse than Epiroc's (OTCPK:EPOKY) performance over the period. Although construction and mining activity has held up reasonably well, major customers are far more cautious on capital spending now, and that is likely to push Komatsu's revenue, margins, and cash flows down in fiscal 2021.

The main attraction I see in Komatsu now is that it's trading at what has historically been an attractive multiple. While I do have my concerns with the company's market share in the Chinese excavator market and its leverage to coal mining, I think those issues are more than reflected in the share price. I won't claim this is the best equipment company, but I do think the risk-adjusted return potential is good enough to merit at least a spot on a watchlist.

Read more here:
COVID-19 Brings Komatsu Back To More Reasonable Levels