I know, I know -- you've heard this from me before. "I like the company/business, but I'm just not so excited about the stock." Well, get ready for another one. This time it's Pall
Results for the company's fiscal fourth quarter are part of the problem. Were they terrible? No. Were they great? No. Sales climbed all of 4% and pro forma earnings (an accounting alchemy that strips out restructuring charges) also climbed just 4%. Both figures also missed the mean analyst estimates -- not by a lot, mind you, but that's four of the past five quarters that Pall has come up a bit short.
Looking into the nitty-gritty of the numbers, you see a real mixed bag. Blood filtration and aerospace were pretty disappointing, while water (especially municipal water) was quite strong. All in all, though, everything blended out to a pretty tepid result -- strong biopharmaceuticals business canceled out weak medical business, while weak aerospace and microelectronics muted the stronger industrial segments.
I'm more than happy to concede that Pall has the potential to do better. I've talked at length about the growth potential in water filtration, and Pall seems relatively well-positioned to take advantage of all manner of industrial and medical needs for increased filtration and purity. But this is a company with a somewhat mixed track record of earnings growth, so I don't think you can simply buy into the future without at least considering the past.
This company does generate some respectable cash flow, so continued debt repayment and dividend declarations shouldn't be an issue -- but the valuation is. Even buying into the notion that future growth will surpass past growth, the stock just looks too expensive based upon any reasonable estimates I can muster. A couple of quarters of better performance may soften my stance, but for now I see no compelling reason to rush into this stock.
We've filtered our archives for more takes:
- 3M: Great at the Little Things
- Water, Water, Everywhere. Forever?
- Pall's Play for Purity
- Clean Air for CLARCOR
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).