SPX Flow May Still Be Ugly Enough To Love

Life has not been easy for SPX Flow (NASDAQ:FLOW). Based upon what happened to other companies with significant oil/gas exposure like Dover (NYSE:DOV) and Emerson (NYSE:EMR), as well as power generation (also relevant to Emerson), it is no great surprise that a company leveraged to selling pumps and valves to upstream and midstream energy companies would be weak. But then dairy processing weakened significantly and kicked out another leg of SPX Flow's stool. With that, annualized revenue from the last quarter was about 30% below the level of 2012 and the company's efforts to improve its cost structure have largely been buried by operational deleverage.

Not all of SPX Flow's problems have been macro-driven (there have been some self-inflicted wounds along the way), but I do believe that there is a reasonable price for most going concerns and I think SPX Flow may be below that level. Orders have started to improve and I believe margins have bottomed out. Although I'm not looking for a V-shaped recovery in oil/gas, and I believe food/beverage isn't going to grow like it used to, modest revenue growth and margin improvements can drive a fair value close to $40. As a stock that hasn't really rocketed up on its recovery prospects, I think SPX Flow might be worth a closer look.

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SPX Flow May Still Be Ugly Enough To Love