A carefully-cultivated skepticism can be an investor's best friend, and when a stock looks oddly mispriced, it's entirely reasonable to wonder why. This brings me to IMI plc (OTCPK:IMIAY) (IMI.LN). I can understand why investors are worried about a fluid/motion control company leveraged to oil/gas and power, but the discount still looks a little large relative to the quality of the business, as well as leverage to more attractive opportunities in short-cycle industrial and climate. On top of that, I see ongoing self-improvement potential from cost-out actions and add-on M&A.
It's been a while since I've written on IMI. I thought it was a borderline call back in May of 2017, and the shares have underperformed the industrial group since then, while the revenue and FCF have developed pretty much as I expected (within about 2%-3% on revenue, 5% on FCF). While I see IMI's exposure to less-attractive end-markets as a drag on growth relative to peers, I do also see the shares as relatively undervalued on just 3% long-term FCF growth.
Read more here:
IMI Plc Underappreciated For Its Short-Cycle Leverage And Self-Help Potential
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