Park-Ohio Holdings Corp. – Value Analysis (NASDAQ:PKOH) : December 5, 2017

Capitalcube gives Park-Ohio Holdings Corp. a score of 28.

Our analysis is based on comparing Park-Ohio Holdings Corp. with the following peers – Anixter International Inc., Parker-Hannifin Corporation, Actuant Corporation Class A, Sun Hydraulics Corporation, Dover Corporation, Crane Co., Omega Flex, Inc. and Lincoln Electric Holdings, Inc. (AXE-US, PH-US, ATU-US, SNHY-US, DOV-US, CR-US, OFLX-US and LECO-US).

Investment Outlook

Park-Ohio Holdings Corp. has a fundamental score of 28 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative underperformance over the last year and the last month suggest a lagging position.
  • It trades at a lower Price/Book multiple (2.00) than its peer median (3.58).
  • The market expects PKOH-US to grow at about the same rate as the peers and to maintain the median returns it currently generates.
  • PKOH-US has relatively low net profit margins while its asset efficiency is relatively high.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • PKOH-US‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s relatively low gross and pre-tax margins suggest a non-differentiated product portfolio and not much control on operating costs relative to peers.
  • While PKOH-US‘s revenues in recent years have grown faster than the peer median, the market gives the stock a P/E ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.
  • The company seems to be over-investing in a business with median returns.
  • PKOH-US seems to be constrained by the current level of debt.

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Leverage & Liquidity

PKOH-US is debt-constrained.

  • With debt at a relatively high 49.78% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 17.54%), and interest coverage level of 2.68x, PKOH-US seems debt-constrained.
  • Of the 8 chosen peers for the company, only 7 of the stocks have an outstanding debt balance. Companies with no debt include OFLX-US.

PKOH-US has maintained its relatively high leverage profile from the recent year-end.

  • PKOH-US‘s interest coverage is similar to last year’s low of 2.60x, which compares to the 2014 high of 3.75x.
  • Compared to 2016, interest coverage has remained relatively stable for both the company (2.68x) and the peer median (8.59x).
  • PKOH-US‘s debt-EV is greater than (but within one standard deviation of) its five-year average debt-EV of 47.37%.
  • Though its debt-EV has remained relatively stable at 49.78% compared to 2016, its peer median has decreased to 17.54% from 19.47% during this period.
  • Relative to peers, debt-EV rose 1.93 percentage points. Unlike the peer median, it is also above the 25% leverage benchmark.

Access the detailed analysis for Park-Ohio Holdings Corp.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Anixter International Inc. 34.7 2.07 4.22 16.47
Parker-Hannifin Corporation 20.98 1.44 8.59 25.07
Actuant Corporation Class A N/A 1.71 2.39 16.82
Sun Hydraulics Corporation 12.33 2.62 18.14 53.36
Dover Corporation 19.95 1.32 6.24 23.33
Crane Co. 15.13 2.66 11.44 49.56
Omega Flex, Inc. 0 3.54 No interest exp 999
Lincoln Electric Holdings, Inc. 13.16 2.55 10.99 43.87
Park-Ohio Holdings Corp. 49.78 2.36 2.68 15.72
Peer Median 17.54 2.36 8.59 25.07
Best In Class 12.33 3.54 No interest exp 999

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Company Profile

Park-Ohio Holdings Corp. engages in the provision of supply chain logistics services and manufactures aluminum products. It operates in three segments: Supply Technologies, Assembly Components, and Engineered Products. The Supply Technologies segment provides customers with total supply management services for a broad range of high volume, specialty production components. The Assembly Components segment manufactures cast aluminum components, automotive and industrial rubber and thermoplastic products, fuel filler and hydraulic assemblies for automotive, agricultural equipment, construction equipment, heavy duty truck and marine equipment industries. It also provides value-added services such as design and engineering, machining and assembly. The Engineered Products segment operates a diverse group of niche manufacturing businesses that design and manufacture a broad range of high quality products engineered for specific customer applications. The company was founded in 1998 and is headquartered in Cleveland, OH.

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