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The company designs, manufactures and distributes construction lifting equipment worldwide. In the current realities, the demand for the company’s products has dropped significantly, which led to a drop in quotations by almost 40% compared to the beginning of the year. It has headquarters in France, Singapore and China. Production is also diversified by country. #MTW manufactures its products in 14 factories in 8 countries, such as Brazil, China, India, USA and several European countries. Therefore, we can say that the company’s production is geographically favorably located – thanks to this, the cost and delivery time are reduced. It is logical to assume that the company’s stock quotes are procyclical – when the economy grows, so does the share price. This can be easily seen from the movement of the stock price over the past 15-20 years. Indeed, with an economic boom, construction costs from households and firms increase significantly.
As for Manitowoc’s business, the company complains that imported goods take some of its revenue from it, since imported cranes are cheaper. Subsequently, the United States identified the sector as a systemically important one, since it is key for the creation of infrastructure.
The main and closest competitor of the company in this sector is the Japanese company Todano, its financial indicators are more stable.
Facts of growth in share prices
Even at the bottom of the economic cycle, when the demand for construction is low, the company’s financial indicators look quite good – Net Debt / EBITDA is 0.78, which is a good indicator of the company’s “survivability” during the crisis. Also protection from the US government and the wide geographical distribution of production, which is also a comparative advantage of the company.
Our verdict regarding the company
The company’s quotes are reliable. At the moment, the global economy and the economy of almost all developed countries, in particular, are at the bottom of the economic cycle. Therefore, in the coming years, economic expansion can be expected, which will entail an increase in the company’s shares. Moreover, the P / E of the company is 5. All these factors make Manitowoc an attractive long-term investment if we expect economic expansion.
Aravana Capital Management provides clients with profitability even during downturns in global equity and bond markets.