When I last wrote about Rotork (OTCPK:RTOXY) (ROR.L), I said that this British manufacturer of valve actuators and controls needed to accelerate product development and margin improvement efforts to support its valuation. Since then, the key oil & gas market has weakened dramatically and the shares have modestly underperformed the industrial sector. Weak organic growth remains a key concern, as although the company has made some progress on the product development front, it just hasn’t been significant enough to shift the company’s revenue mix all that much.
Rotork has good technology, and I expect electrical valve actuation technology is only going to become more valuable as 5G drives industrial IoT adoption and growth. On the other hand, I believe capex spending in the oil & gas vertical could be pressured for possibly five years, and that’s going to seriously challenge management’s capabilities. More positively, I do see Rotork as an increasingly attractive M&A target, though I’m not sure how much of a premium investors could reasonably expect to get.
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