Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 4 stocks made the list for top value stocks in the Industrial Machinery & Equipment industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Industrial Machinery & Equipment Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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4 Undervalued Industrial Machinery & Equipment Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 4 undervalued stocks in the Industrial Machinery & Equipment industry for Wednesday, September 18, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Industrial Machinery & Equipment industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Ebara Corp (ADR)’s Value Grade

Value Grade:

Ebara Corp is a Japan-based company mainly engaged in manufacturing, sales, construction, maintenance and services in various fields, including wind and hydro energy business, environmental plants business, precision and electronics business. The Company operates through three segments. The Wind and Hydro Energy segment is engaged in the manufacture, sale, operation and maintenance of pumps, compressors, turbines, refrigeration equipment and blowers. The Environmental Plants segment is engaged in the engineering, construction, operation and maintenance of municipal waste incineration plants, industrial waste incineration plants and water treatment plants. The Precision and Electronics segment is engaged in the manufacture, sale and maintenance of vacuum pumps, chemical mechanical polishing (CMP) equipment, plating equipment and exhaust gas treatment equipment. The Company is also engaged in the provision of business support services.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Ebara Corp (ADR) has a Value Score of 63, which is considered to be undervalued.

When you look at Ebara Corp (ADR)’s price-to-sales ratio at 1.13 compared to the industry median at 1.78, this company has a lower price relative to revenue compared to its peers. This could make Ebara Corp (ADR)’s stock more attractive for value investors.

Ebara Corp (ADR)’s price-earnings ratio is 13.01 compared to the industry median at 24.76. This means it has a lower share price relative to earnings compared to its peers. This could make Ebara Corp (ADR) more attractive for value investors.

Now, let’s assess Ebara Corp (ADR)’s EV/EBITDA ratio, also known as enterprise multiple. At 8.2, when compared to the industry median of 13.5, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Ebara Corp (ADR)’s shareholder yield is higher than its industry median ratio of 0.43%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Ebara Corp (ADR)’s price-to-book ratio is lower than its industry median ratio of 2.50. This could make Ebara Corp (ADR) more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Ebara Corp (ADR)’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Ebara Corp (ADR)’s price-to-free-cash-flow ratio is higher than its industry median ratio of 28.46. This could make Ebara Corp (ADR) less attractive because the higher P/FCF ratio indicates that Ebara Corp (ADR) is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Hillenbrand, Inc.’s Value Grade

Value Grade:

Hillenbrand, Inc. is a global industrial company that provides processing equipment and solutions. The Company operates through two segments: advanced process solutions and molding technology solutions. The advanced process solutions segment is a provider of process and material handling equipment, systems, and aftermarket parts and services for a variety of industries, including durable plastics, food and recycling. This segment's technologies include compounding, extrusion, material handling, conveying, mixing, ingredient automation, portion process, and screening and separating equipment. The molding technology solutions segment provides equipment, systems and aftermarket parts and service for the plastic technology processing industry. This segment has a product portfolio that includes injection molding and extrusion equipment, hot runner systems, mold bases and components, and maintenance, repair, and operating supplies. Its brands include Coperion, Milacron, K-Tron and Rotex.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Hillenbrand, Inc. has a Value Score of 76, which is considered to be undervalued.

Hillenbrand, Inc.’s price-to-book ratio is higher than its peers. This could make Hillenbrand, Inc. less attractive for value investors when compared to the industry median at 2.50.

You can read more about Hillenbrand, Inc.’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Hurco Companies, Inc.’s Value Grade

Value Grade:

Hurco Companies, Inc. is an international, industrial technology company. The Company designs, manufactures, and sells computerized (such as Computer Numeric Control (CNC)) machine tools, consisting primarily of vertical machining centers (mills) and turning centers (lathes), to companies in the metal cutting industry through a worldwide sales, service, and distribution network. Its computer control systems and software products are primarily sold as integral components of its computerized machine tool products. It also provides machine tool components, automation integration equipment and solutions for job shops, software options, control upgrades, accessories, and replacement parts for its products, and customer service, training, and applications support. It has three brands of CNC machine tools in its product portfolio, including Hurco, Milltronics and Takumi. It pioneered the application of microprocessor technology and conversational programming software for use in machine tools.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Hurco Companies, Inc. has a Value Score of 94, which is considered to be undervalued.

Hurco Companies, Inc.’s price-to-book ratio is higher than its peers. This could make Hurco Companies, Inc. less attractive for value investors when compared to the industry median at 2.50.

You can read more about Hurco Companies, Inc.’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Kennametal Inc.’s Value Grade

Value Grade:

Kennametal Inc. is an industrial technology company that delivers productivity to customers through materials science, tooling and wear-resistant solutions. The Company helps customers in the aerospace & defense, earthworks, energy, general engineering and transportation end markets. The Company's core expertise includes the development and application of tungsten carbides, ceramics, super-hard materials and solutions used in metal cutting and extreme wear applications to keep customers up and running longer against conditions such as corrosion and high temperatures. The Company operates through two segments: Metal Cutting and Infrastructure. The Metal Cutting segment develops and manufactures high performance tooling and metal cutting products and services and offers an assortment of standard and custom metal cutting solutions. The Infrastructure segment produces engineered tungsten carbide and ceramic components, earth-cutting tools, and advanced metallurgical powders.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Kennametal Inc. has a Value Score of 66, which is considered to be undervalued.

Kennametal Inc.’s price-earnings ratio is 20.2 compared to the industry median at 24.8. This means that it has a lower price relative to its earnings compared to its peers. This makes Kennametal Inc. more attractive for value investors.

Kennametal Inc.’s price-to-book ratio is higher than its peers. This could make Kennametal Inc. less attractive for value investors when compared to the industry median at 2.50.

You can read more about Kennametal Inc.’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Industrial Machinery & Equipment Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Industrial Machinery & Equipment stocks as well as other industrys.

Choosing Which of the 4 Best Industrial Machinery & Equipment Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Ebara Corp (ADR) stock has a Value Grade of B.
• Hillenbrand, Inc. stock has a Value Grade of B.
• Hurco Companies, Inc. stock has a Value Grade of A.
• Kennametal Inc. stock has a Value Grade of B.

Now that you have a bit more background about each of the 4 undervalued stocks in the Industrial Machinery & Equipment industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Industrial Machinery & Equipment Stocks

Want to learn more about Industrial Machinery & Equipment stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 4 Undervalued Industrial Machinery & Equipment Stocks for Wednesday, September 18
• 5 Undervalued Industrial Machinery & Equipment Stocks for Tuesday, September 17
• Why ATS Corp’s (ATS) Stock Is Up 4.56%
• Why Hayward Holdings Inc’s (HAYW) Stock Is Up 4.12%

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