donaldson stock

Donaldson Stock Analysis NYSE DCI – Safe, sound and boring can be a bad investment

Donaldson stock analysis is part of a full Waste Management stocks sector investing analysis alongside a list of 15 waste management stocks, all analyzed.

Donaldson Stock Analysis

Donaldson Company, Inc. is a vertically integrated filtration company engaged in the production and marketing of air filters used in a variety of industry sectors, including commercial/industrial, aerospace, chemical, alternative energy and pharmaceuticals.

Donaldson stock performed extremely well over the past 3 decades but has been volatile as of lately and is especially volatile during economic downturns.

Donaldson stock price chart
Donaldson stock price chart

The volatility is probably due to the relatively high price to earnings ratio of 28.5. The company didn’t grow as fast as the stock price did in the last 10 years. Revenues increased just 33%, earnings not even 20% since 2012 while the only thing growing was the dividend.

Donaldson stock financials - Morningstar
Donaldson stock financials – Morningstar

Given the past performance, I find it unlikely that the company will grow faster in the future and therefore it is not an attractive investment for me. I understand investors that see it as a safe investment that will compound over the long-term as the return on invested capital has constantly been above 15% over the past decade and Donaldson has a strong balance sheet, but apart from safe and sound, there is not much to it.

Donaldson’s dividend has been increasing for the last 20 years but I don’t see that as enough of a sign to invest in it at any price.

   Donaldson stock dividend  - Source: Donaldson’s Investor Relations
Donaldson stock dividend  – Source: Donaldson’s Investor Relations

Plus, the company is exposed to risky and cyclical sectors like construction and industry that you never know when will turn into a slump.

Donaldson’s stock outlook  - Source: Donaldson’s Investor Relations
Donaldson’s stock outlook  – Source: Donaldson’s Investor Relations

The slump might not be big, but at a valuation close to 30, it could be big for investors, as it was the case in 2016 and 2009!

Donaldson stock price volatility
Donaldson stock price volatility

As the company makes air filters, vehicle electrification poses a risk but that is still pretty far away from happening.

All in all, this could be an interesting investment to make during an economic downturn as you need their products no matter what.

Sven Carlin Ph.D., the author, is an independent stock market researcher and investor managing the Sven Carlin Stock Market Research Platform.

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