John Bean Technologies reported stronger-than-expected third-quarter results and bumped up its guidance for the rest of the year.
That would make it seem like right now is a good time to get in on this stock. Let's take an in-depth look at whether that's the case.
John Bean Technologies specializes in a diverse mix of technology products and services. It provides food-processing equipment and services. It builds automatic fork lifts and warehouse equipment. And it builds ground support equipment for airports (think baggage loaders and plane de-icers.) This diversified portfolio could protect the company in the event of a cyclical downturn.
Since its inception (John Bean was spun off from FMC Technologies back in 2008), the company's business has always been strong.
As a hardcore industrial stock, John Bean Technologies has actually outdone many better-known stocks. As we noted, it's up 389% over the past five years. That's better than GeneralElectric (up 75%), Amazon (up 251%), and even Expedia (up 372%).
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In fact, for the past six months, John Bean has done exceedingly well, gaining 45%.
John Bean's third-quarter financial report was rock-solid. For the third quarter its EPS beat estimates by 13 cents, and revenue surpassed expectations by $36 million. John Bean's order backlog increased 25% year over year.
The company's acquisition strategy has historically been wise. And there's probably a fresh wave of organic growth in the horizon, with the recent acquisition of Cooling and Applied Technology for $90 million. John Bean has also inked a definitive agreement to purchase Tipper Tie for $160 million. These new assets should create value for shareholders, with a substantial projected earnings bump in 2017 and 2018.
However, investors shouldn't be too hasty about getting into this stock.
While the company's moderate financial health and strong earnings growth prospects are compelling, valuations fully price in all the positives. The stock trades at a price-to-earnings ratio of 36, which significantly higher than the industry average of 22 and the S&P 500's P/E of 24. Larger industrial peers such as Honeywell and 3M have lower P/Es, too.
The stock's recent gains make it at the very least a bit pricey right now. John Bean remains a great investment, but patient buyers should only get in on significant dips. Hold off for a bit, until the eventual pullback happens.
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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.