Shares in positioning technology company Trimble (TRMB 2.77%) declined 17.2% in January, according to data from S&P Global Market Intelligence. The fall comes in line with a general sell-off in technology stocks.
While there wasn't any fundamentals-based news to drag Trimble lower, the broader market sell-off inevitably causes investors to offload stocks on a relative valuation basis. In other words, if investors lower the valuation multiple they will pay for the Nasdaq index, then they will also reduce the multiple they will pay for Trimble.
Trimble got hit harder than many because of its lofty valuation; it now trades at 26 times estimated 2021 earnings, implying significant growth over the long term. Investors aren't willing to pay more than that right now to take on the risk that Trimble might not grow as much as expected.
The sell-off creates an exciting entry point into a company with plenty of growth potential. Trimble provides hardware, software, and analysis of a company's assets in real time to be monitored and controlled to improve performance.
For example, farmers increasingly use precision agriculture to monitor and guide equipment and gather data to make better decisions over seeding, nurturing, and harvesting crops. Likewise, trucking companies use real-time data to monitor and guide fleets in real time to maximize productivity. Finally, contractors in building and construction companies can better follow engineering plans using Trimble's positioning technology, therefore eliminating significant amounts of waste and unnecessary carbon emissions.
Many of Trimble's end markets are already increasing the adoption of its technology. Moreover, the trend toward digitizing company assets means Trimble should be able to achieve its ongoing aim of being integrated into its customers' daily workflow. That will open up growth opportunities for its software and services growth.
Trimble will release its fourth-quarter earnings on Feb. 9, and that will be a good opportunity for management to demonstrate that the company remains on a sound growth track. In the end, if its fundamentals and earnings are improving, then the market will decouple the stock from negative market sentiment.