ALAMO GROUP INC. (ALG): what the price requires
At today's price, ALAMO GROUP INC. (ALG) is priced for -0.2% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/ALG
Headline
| Field | Value |
|---|---|
| Ticker | ALG |
| Company | ALAMO GROUP INC. |
| Current price | $161.58/sh |
| Composition | Vegetation Management 41% / Industrial Equipment 59% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 4.0% |
| Operating margin today | 10.4% |
| Margin compression implied | -6.4pp |
| Implied growth | -0.2% |
| Multiple paid | 12x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 9% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~5.5pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.65σ |
| cohort percentile (of 225 peers) | 12 |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.85x | 5 | expensive |
| Earnings | 1.78x | 4 | expensive |
| Relative | 1.08x | 3 | expensive |
| Growth | 1.14x | 3 | expensive |
Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.2%); the inversion above states its own rate.
Per-Model Detail (n=15)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $141.17 | 1.14x | yes | FCF base $0.1B, growth 2% (input: historical growth), terminal g 2.3%, WACC 8.2%, 5yr projection |
| DCF Exit Multiple | Growth | $149.97 | 1.08x | yes | Exit EV/EBITDA: 11.2x / 13.2x / 15.2x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $150.28 | 1.08x | yes | P/E 18x (static sector reference · 2026-04), scenarios: 15.1x / 18.0x / 20.9x (bear / base = reference held flat / bull), EV/EBITDA 12x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $90.38 | 1.79x | yes | BV/sh $96.91, ROE (TTM) 8.6%, ke 9.3% |
| Two-Stage Excess Return | Asset | $87.28 | 1.85x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $109.44 | 1.48x | yes | Rev $1.6B, growth 2% (input: historical growth; tapered), Terminal P/S: 1.0x / 1.2x / 1.4x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $108.80 | 1.49x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.16B × (1−25%) / WACC 8.2% → EPV (no growth) |
| Residual Income | Asset | $86.77 | 1.86x | yes | BV $96.91 + 5yr PV of (ROE (TTM) 8.6% − Kₑ 9.3%) × BV; BV grows 5.6%/yr |
| Graham Number | Asset | $135.02 | 1.20x | yes | √(22.5 × EPS $8.36 × BVPS $96.91) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $146.65 | 1.10x | yes | EBITDA $0.16B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $90.83 | 1.78x | yes | FCF $110.7M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $82.36 | 1.96x | yes | SBC-adj FCF $0.10B (FCF $0.11B − SBC $0.01B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $7.01 | 23.05x | yes | EPS $8.36 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | $29.31 | 5.51x | yes | BV $96.91 × (ROIC 2.5% / WACC 8.2%) |
| P/Sales Sector | Relative | $336.68 | 0.48x | yes | Revenue $1.63B × sector P/S 2.5x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $90.38 | 1.79x | yes | EPS $8.36 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $95.2m |
| Net debt / NOPAT (after-tax) | 0.74x |
| Net debt / operating income (pre-tax) | 0.56x |
| Interest coverage | 11.1x |
| Share count CAGR (dilution) | 0.4% |
| Burning cash | no |
Bullet Takeaways
The decisive number is the multiple: at $160.90 the market pays about 12 times operating income, low enough that the price embeds essentially no growth, roughly flat operating profit for five years.
The business is steadier than that implies. First-quarter 2026 revenue grew 6.7 percent as Vegetation Management returned to growth, and the blended valuation methods land near $141, just below the price.
The caution is in the order book. Industrial Equipment net orders fell 11 percent and management expects industrial sales growth to slow in 2026 after several strong years, which is part of why the multiple is modest rather than a clear bargain.
Bull Case
The single most decisive metric here is the multiple, and it is unusually low. At $160.90 (June 27, 2026) the market pays about 12 times company-wide operating income, which inverts to roughly negative 0.4 percent annual operating growth over five years. In plain terms, the price assumes Alamo's operating profit stays essentially flat, even drifts slightly lower, for half a decade. That is a modest bar for a profitable, well-positioned niche equipment maker, and it is the heart of the bull case: you are not paying for growth, so you do not need much to be rewarded.
The business behind that multiple is solid and diversified. Alamo runs two divisions, Vegetation Management, which makes mowers and tractor-mounted equipment for agricultural, municipal and forestry customers, and Industrial Equipment, which makes street sweepers, snow-removal gear, excavators and related machinery largely for governmental and infrastructure buyers. In the first quarter of 2026 revenue grew 6.7 percent as Vegetation Management returned to growth and acquisitions contributed, with the new Petersen Industries grapple-loader business added to the mix. Vegetation Management net sales rose 7.0 percent to $175.4 million, and both divisions ran a book-to-bill near one, meaning orders are roughly keeping pace with shipments.
The financial profile is conservative, which protects the low-growth thesis. Net debt is under one year of operating income, interest coverage is comfortable near 9.2 times, and the Industrial Equipment division still earns a healthy adjusted EBITDA margin around 16 percent. The asset and earnings-power methods read the price as a touch expensive, but the relative-multiple and forward-growth frames support it, and the blended central value sits near $141, only modestly below the price. A steady, cash-generative equipment maker priced for stagnation, with a clean balance sheet and a recent return to top-line growth, is a value-leaning name where even ordinary execution clears the bar the price sets.
Bear Case
Alamo is a genuinely good business, and the bear case is precisely that a good business can still be fairly priced rather than cheap. This is a disciplined niche manufacturer with strong divisional margins, governmental and infrastructure end markets, and a long record of bolt-on acquisitions. But quality does not automatically mean a bargain, and the low 12-times multiple is not obviously a gift once you look at where the business is in its cycle. The price-to-fundamentals disconnect that the bulls read as upside may simply be the market correctly pricing a company whose strongest division is decelerating.
The order book is the warning. Industrial Equipment net orders fell 11 percent in the first quarter, and management itself expects overall industrial sales growth to slow in 2026 after several years of rapid expansion. Industrial Equipment is the larger division, so a slowdown there sets the tone for the whole company. The filing also describes recent weakness elsewhere, noting a decrease in sales "attributable to weaker market demand in forestry, tree care, and agricultural mowing markets" (FY2025 10-K, accession 0000897077-26-000016), and flags that net income was "impacted by the CEO transition costs, acquisition and integration expenses, and ongoing restructuring efforts" (same filing). A company managing a leadership change, integration costs and restructuring while its biggest division slows is not in an obvious re-rating position.
The demand base adds cyclicality the multiple already reflects. Much of Alamo's revenue depends on governmental and municipal budgets and on agricultural and infrastructure spending, all of which ebb with economic and fiscal cycles. The company also faces input-cost pressure and warns it "may not be able to fully offset increased input costs in the future" if "price increases are not accepted" by customers (same filing), which is why first-quarter gross margin compressed. With the price near the blended methods rather than well below them, and the dominant division guided to slow, the low multiple looks like a fair price for a steady but cyclical equipment maker, not a clear value opportunity, and a deeper industrial slowdown would make even 12 times look full.
Valuation
The price decomposes as a value-leaning, low-expectations name. At $160.90 the market pays about 12 times company-wide operating income, which inverts to roughly negative 0.4 percent annual operating growth over a five-year stage. In other words, the price embeds essentially flat operating profit, a within-range and undemanding assumption. The asset and earnings-power methods read the stock as slightly expensive, but the relative-multiple and forward-growth frames justify it, and the blended central value across methods sits near $141, just below the $160.90 price.
The valuation is therefore close to fair rather than dramatically cheap or dear. Because the embedded growth is near zero, the downside protection comes from the low bar: the business does not need to grow for the price to make sense, only to hold its operating profit roughly steady. The recent results support that, with first-quarter revenue up 6.7 percent and Vegetation Management back to growth. The offsetting risk is that Industrial Equipment, the larger division, is decelerating, with net orders down 11 percent and management guiding industrial sales growth to slow in 2026, and that input-cost pressure is compressing margins. The investment case is a modest one: at 12 times operating income with the price near the blended methods, the reward is a steady, cash-generative equipment maker bought at an undemanding multiple, and the risk is that a broader industrial slowdown turns the flat-growth assumption into a declining one, at which point even a low multiple offers limited cushion.
Catalysts
Industrial Equipment orders are the central catalyst. Net orders in the larger division fell 11 percent in the first quarter, and management expects industrial sales growth to slow in 2026 after several strong years. The order trend, with strength in snow and European vacuum and excavation against softness elsewhere, is the key signal of whether the division stabilizes or continues to decelerate. A book-to-bill near one means orders are currently matching shipments.
Vegetation Management recovery is the offsetting catalyst. The division returned to growth with net sales up 7.0 percent and orders up 5 percent, led by agricultural and municipal demand, though tree care and municipal mowing remain soft. Continued recovery here would offset the industrial slowdown; renewed weakness would compound it. New product momentum, including a non-CDL vacuum truck reported sold out for 2026 and the Petersen Industries grapple-loader acquisition, is worth tracking.
Margins and end-market budgets are the swing factors. Gross margin compressed on input costs, so whether Alamo can pass through price is a quarterly item to watch. Because much of the revenue depends on governmental, municipal, agricultural and infrastructure budgets, fiscal and economic conditions in those end markets are the external catalysts in either direction. Quarterly results remain the main proof point on whether operating profit is holding the roughly flat trajectory the price assumes.
Peer Cohorts (Per Segment, With Filing Citations)
Vegetation Management (reported)
- AGCO (AGCO CORP /DE)
- (no filing in the citation store)
- CNH (CNH INDUSTRIAL N.V.)
- (no filing in the citation store)
- DE (DEERE & CO)
- (no filing in the citation store)
- TTC (THE TORO COMPANY)
- (no filing in the citation store)
- GRC (The Gorman-Rupp Company)
- (no filing in the citation store)
Industrial Equipment (reported)
- OSK (Oshkosh Corporation)
- (no filing in the citation store)
- TEX (Terex Corporation)
- (no filing in the citation store)
- FSS (FEDERAL SIGNAL CORPORATION)
- (no filing in the citation store)
- MWA (MUELLER WATER PRODUCTS, INC.)
- (no filing in the citation store)
- VMI (VALMONT INDUSTRIES INC)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.