Colfax has become a difficult company to evaluate!
Colfax Corp. (NYSE: CFX) has become a difficult company to evaluate:
The company has a strong culture, is very cost conscious applying their Colfax Business System (CBS) tools. They are able to acquire and integrate rapidly complementary businesses.
But since 2014 the company struggles to produce significant growth which is reflected by the share price since then.
In 2017 they exited the fluid handling business selling it to Circor International Inc. and by that reducing debt and improving their balance sheet.
But the question remains: Will Colfax return to higher growth rates investors once were accustomed to?
Unfortunately the release of FY and Q4 2017 results did not provide any certain answers:
Sure, earnings on a pro forma basis beat market estimates by a penny but on a GAAP basis net income per share for the 4th quarter came in at only $0.10 per share.
From continuing operations Colfax even reported a loss of $1.53 per share.
Apparently the fabrication technology sector fared rather well in the 4th quarter. Colfax reported an organic growth of 7%.
But the Air & Gas Handling sector is expected to improve only in the second half of 2018 as CEO Trorotola explained on the Conference Call.
Reflecting the uncertainty Colfax gave guidance of FY 2018 earnings of $ 2 – $ 2.15 but once again only on an adjusted basis!
The market did not like what he saw and sent the share price down by 9%.
So what should shareholders do now?
Perhaps the best for the moment is a „wait and see approach“. In 2 quarters it should be clear whether Colfax’ end markets are finally recovering or not.
If not and if the share price continues to hover around today’s prices it’s perhaps the moment to look for better investment opportunities elsewhere!