Recent Dip in Joy Global (JOY) Stock Makes It One Hot M&A Candidate
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Joy Global (NYSE: JOY) is higher out of the gate Tuesday following reports it might be a juicy acquisition target for one of Japan's largest industrial machinery manufacturer and seller. According to Bloomberg, with one of the cheapest valuations in the segment (8.2 times trailing 12-month earnings versus 13 times industry-wide) and the ability to generate margins at twice the competition, who could blame them?
The potential buyer? Komatsu Limited.
Komatsu could put an 80 percent premium on Joy Global's head and still nab the company at one of the cheapest net income multiples on record.
Of course, Joy Global's stock has fallen 43 percent since last February, as macro pressures have questioned the need for more coal mining equipment with the drop in demand. Just last week, Joy Global cut its outlook for fiscal 2012, citing coal demand as the primary reason.
But, Joy Global is also very profitable and maintains those solid margins. Last quarter, Joy Global profited 13.6 cents for each dollar brought in. By comparison, the industry averaged 6.4 cents.
About 60 percent of Joy Global's top-line growth comes from maintenance and repair work, which is a predictable, recurring revenue stream.
Shares of Joy Global are 2.2 percent higher in early Tuesday trading.
The potential buyer? Komatsu Limited.
Komatsu could put an 80 percent premium on Joy Global's head and still nab the company at one of the cheapest net income multiples on record.
Of course, Joy Global's stock has fallen 43 percent since last February, as macro pressures have questioned the need for more coal mining equipment with the drop in demand. Just last week, Joy Global cut its outlook for fiscal 2012, citing coal demand as the primary reason.
But, Joy Global is also very profitable and maintains those solid margins. Last quarter, Joy Global profited 13.6 cents for each dollar brought in. By comparison, the industry averaged 6.4 cents.
About 60 percent of Joy Global's top-line growth comes from maintenance and repair work, which is a predictable, recurring revenue stream.
Shares of Joy Global are 2.2 percent higher in early Tuesday trading.
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