Currently, Dover trades for 17.4 times TTM earnings, which seems reasonable given the company’s projected growth rate. Dover expects revenue growth of about 7.5% this year, as well as slightly higher profit margins. As a result, earnings of $5.24 per share are expected this year, rising to $5.89 and $6.37 in 2014 and 2015, respectively. This implies a projected three year average annual forward earnings growth rate of 12.8%, more than justifying the P/E.
Alternatives: Ingersoll-Rand PLC (NYSE:IR) and Weatherford International Ltd (NYSE:WFT)
Ingersoll-Rand PLC (NYSE:IR) makes an equally diverse, yet different, mix of products for various industrial uses. Over half of Ingersoll-Rand PLC (NYSE:IR)’s business comes from their Climate Solutions segment, which provides HVAC products under such brand names as Thermo King and Trane. The company also produces residential products such as locks and security equipment under the American Standard and Schlage brands, utility vehicles such as Club Car, and more. Ingersoll-Rand is similarly valued to Dover at 17.2 times earnings and is projected to grow its earnings at a 13.7% rate going forward, slightly ahead of Dover.
Weatherford International Ltd (NYSE:WFT) is much less diverse in terms of product offerings, manufacturing equipment for the drilling, construction, and operation of oil and gas wells, and is the biggest competitor to Dover’s energy segment. The anticipated increase in oil rig construction over the next several years is expected to help Weatherford International Ltd (NYSE:WFT)’s profits tremendously. The company trades at 23.3 times last year’s earnings, but are projected to nearly triple its annual earnings by 2015. Bear in mind that the oil and gas industry can be very volatile and Weatherford is essentially putting all of its eggs in that basket.
Conclusions
Although all three of these look good at their respective current share prices, I prefer a company with a diverse product line such as Dover or Ingersoll-Rand. I prefer Dover in this case because I think their exposure to energy and mobile communications will produce better-than-expected growth over the next several years and beyond.
The article This Company’s Products Are Diversified Among High-Growth Sectors originally appeared on Fool.com.
Matthew Frankel has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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