3 Reasons To Like Gardner Denver Shares

Looking for a reason to buy shares of recently IPO'ed Gardner Denver Holdings Inc GDI? How about three reasons, courtesy of analysts at Stifel. Stifel's Nathan Jones initiated coverage of Gardner Denver's stock with a Buy rating and $27 price target as the company is a leading provider of flow control and compression equipment and aftermarket parts to industrial, energy and medical industries.

3 Reasons To Buy

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Gardner manufacturers an impressive range of products that management is able to leverage given its global geographic footprint and vast expertise, the analyst believes. As such, the company is able to provide a differentiated product and services offerings to a broad and diverse customer base.

Jones highlighted three factors to support his bullish stance.

First, Gardner Denver is still in the early days of an operational transformation with the objective of cutting costs, achieving operational efficiency and generate meaningful margin expansions.

Second, the company is setting itself up to better take advantage of what the analyst believes will be an period of increasing U.S. rig counts throughout 2017 and 2018. In addition, a "more modest" improvement in midstream and downstream oil and gas will help boost Gardner Denver's Energy segment.

Third, while the company's Medical segment to see "modest" share loss and low-single digit growth this trend will reverse in 2019 when the segment will return to a mid-single digit growth rate or greater.

Bottom line, Gardner Denver's stock is trading at just 13.2x 2017E adjusted EV/EBITDA and 16.8x 2018E adjusted EPS but the stock should trade at a much higher multiple as the company is "coming off of the worst cyclical trough in probably over three decades." The analyst's $27 price target implies a 20x 2018E adjusted EPS multiple.