ALG doesn't have a lot of pessimism to be unwound at the moment
Alamo Group Inc. (NYSE:ALG) is one of the world's largest designers and manufacturers of industrial equipment, operating 27 plants in North America, Europe, Australia, and Brazil.
After a record high of $165.97 on May 10, Alamo Group stock pulled back to its 200-day moving average. A bounce from here has ALG last seen trading at $152.11and above the 10% year-to-date level. The shares also have a forward dividend of $0.56 and a dividend yield of 0.37%.
From a fundamental point of view, Alamo Group stock isn’t the best investment right now at its current valuation. Alamo Group stock trades at a high price-earnings ratio of 30.78. In addition, ALG has struggled to maintain steady net income growth in recent years. Alamo Group experienced back-to-back years of bottom-line declines, with net income decreasing by 23% between fiscal 2018 and fiscal 2020. ALG has managed to maintain consistent revenue growth even throughout the COVID-19 pandemic, making it difficult to imagine Alamo Group stock losing significant value in the long-term. However, investors are better suited waiting for another bout of weakness --like last month's pullback -- or some strong earnings to justify Alamo Group stock’s high valuation.
Don't expect much of a contrarian unwinding of pessimism though. A slim 1% of ALG's total available float is sold short, and the two analysts in coverage both rate the stock a "buy" or better.