ALAMO GROUP INC. (ALG): what the price assumes

In the published model solve dated 2026-Q2, anchored at $165.27, ALAMO GROUP INC. (ALG) is priced for +4.8% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/ALG

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 9.1% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

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.

Families that justify the price: 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 8.3%); the inversion above states its own rate.

Per-Model Detail (n=12)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• Alamo builds the machines that cut roadside grass, sweep streets and clear snow, and sells them through independent dealers to governmental end-users, related independent contractors and utility and other dealers serving infrastructure maintenance operators, so its customer is usually a public works budget rather than a consumer.
• Wholegoods, meaning complete machines, is 80% of revenue and books once per sale, while the higher-quality replacement-parts stream is only 16%, which is why a slow year in equipment shows up immediately rather than being cushioned.
• Second-quarter results land after the close on August 3, 2026, and the line that matters is whether Vegetation Management can follow its first year-over-year sales increase in nine quarters with a second one.

Bull Case

For nine consecutive quarters, Alamo's Vegetation Management business shrank against the year before. In the first quarter of 2026 it stopped. That division grew year over year for the first time since 2023, and its margins improved from the previous quarter as plant execution got better, while total company sales rose 6.7% to $417.1 million. Turning points in industrial businesses are rarely dramatic. They look exactly like this: one segment stops falling, and the arithmetic of the whole company changes.

The size of the hole being climbed out of explains why that matters so much. Vegetation Management sales fell from $979.0 million in 2023 to $785.2 million in 2024, a decline the company attributed to weaker market demand in forestry, tree care, and agricultural mowing markets, partially offset by continued strong demand for industrial equipment. Nearly $200 million of revenue left one division in a single year, and the consolidated result barely moved: net sales in 2025 were $1,603.7 million, a decrease of $24.8 million or 1.5% compared to $1,628.5 million the year before. Two divisions serving genuinely unrelated end markets held the company almost flat through a collapse in one of them.

The other division is why. Alamo's industrial equipment goes to municipalities and infrastructure contractors, whose spending follows road-maintenance obligations rather than the farm economy or the housing cycle. Street sweepers and snow removal equipment get bought because the street still needs sweeping. That is not a glamorous demand curve, but it is an unusually indifferent one, and it is the reason the company was still converting 10.4% of $1.63 billion of revenue into operating profit in a year it describes as weak.

The middle of the industrial cohort is where that lands Alamo, and the comparison is more flattering than the growth rate suggests. Oshkosh converts 8.1% of $10.43 billion of revenue into operating profit, Terex 5.5% of $5.93 billion, Toro 9.4% of $4.66 billion and AGCO 6.0% of $10.37 billion. Alamo out-earns all four on that measure while being a fraction of their size, which is what a portfolio of niche products with limited direct competition tends to look like in the accounts.

None of it is financed aggressively. Interest is covered roughly eleven times by operating profit, net debt sits at about 0.56 times operating profit, and the share count has moved about 0.4% a year over four years. Management has set out long-term targets of double-digit sales growth and an adjusted operating margin of 15%. Whether those arrive is a separate question. What the balance sheet says is that the company can keep buying small manufacturers and waiting for its end markets without needing anything from anyone.

Bear Case

Take the acquisitions out of last quarter's growth and very little remains. Industrial Equipment expanded on purchased revenue, and management's own expectation is for underlying organic sales to run roughly flat to up low single digits through 2026 as the division laps an unusually strong stretch. That is the fragile assumption inside this price: not a heroic growth rate, but the idea that a serial acquirer's reported numbers describe an improving business rather than a larger one. The costs of that strategy are already visible on the income statement, where the company reported that net income was impacted by the CEO transition costs, acquisition and integration expenses, and ongoing restructuring efforts, and where purchase amortization is expected to run $16.2 million for each of the next five years before a single machine is sold.

The margin direction is the second problem, and it moved the wrong way even in the good quarter. First-quarter gross margin was 25.1%, down 118 basis points from a year earlier, which the company attributed to continued weakness in municipal mowing and inefficiencies at certain facilities. A business that grows sales 6.7% while handing back more than a point of gross profitability is buying revenue with price or absorbing cost it cannot pass on. The 10-K names the mechanism: the company is exposed to the risk that the price of energy, steel and other purchased components may increase and the Company may not be able to increase the price of its products correspondingly.

Then there is the structure of the demand itself. Wholegoods is 80% of revenue, meaning most of what Alamo sells is a complete machine bought once, with a replacement-parts stream of only 16% behind it. There is very little recurring revenue to smooth a downturn, and the order book offers less comfort than it appears to, because the company states plainly that The Company's orders are subject to cancellation at any time before shipment; therefore, a comparison of unfilled orders from period to period is not necessarily meaningful. A backlog that can be cancelled is a forecast, not a contract.

What the price pays for all this is where the argument sharpens. The shares sit roughly 90% above where book-value-based approaches land and about 83% above what the company's current earnings power supports when capitalized without growth. Only the peer-multiple and forward-growth approaches reach, and they clear it by 10% and 18% respectively, which is to say barely. Return on equity is 8.6%, below the roughly 9.3% an equity investor would look for at this level of risk. A company earning less on its capital than that capital costs is, over time, worth less than its book value rather than the roughly 70% premium to book the shares currently carry. That gap between what the business earns on its capital and what the shares cost is the whole of the bear case, and no amount of acquisition accounting closes it.

Management's own long-term target is a 15% adjusted operating margin, which frames the distance honestly. The company converts 10.4% today. Closing that distance depends on three things landing at once: the Vegetation Management recovery being real, the acquired businesses integrating cleanly, and input costs behaving. All three have to happen in end markets where the company has just described U.S. agriculture as softer and its own outlook as one it is a bit more cautious about.

Valuation

It is unusual to find a price that asks for almost nothing, and this is close to one. About 12.4 times company-wide operating income embeds operating growth of about 0.5% a year, a bar so low that the business essentially has to avoid shrinking rather than achieve anything. The implied operating margin over the coming decade is around 4.1%, against 10.4% earned over the trailing year. The market, in other words, is priced for the current level of profitability to erode by more than half and for growth to stop. That is a genuinely defensive set of assumptions, and against its sector the multiple sits in the lower half of the peer range.

The methods split roughly down the middle rather than pointing one way. Peer multiples and the forward-looking approaches both reach the shares, the first by about 10% and the second by about 18%. Book-value approaches and the lens that capitalizes current earnings without any growth both land far under, with the shares roughly 90% and 83% above them. That is the fingerprint of a business the market is comfortable pricing on what comparable companies fetch, while the approaches anchored on returns and assets are unconvinced.

They are unconvinced for a specific and checkable reason. Alamo earns 8.6% on its equity against a required return closer to 9.3%. A company that earns less on its capital than the capital costs does not compound value for its owners, and the book-value methods encode exactly that: they mark the equity down rather than up. The shares change hands roughly 70% above book value. Reconciling those two facts is the analytical question for this name, and the honest answer is that they are not currently reconciled. One of them is wrong, and which one depends on whether 8.6% is the trough of a cycle or the middle of one.

The cohort gives partial support to the optimistic reading. Alamo converts 10.4% of $1.63 billion of revenue into operating profit. That is ahead of Oshkosh at 8.1%, Terex at 5.5% and AGCO at 6.0%, and behind Federal Signal at 16.0% on $2.34 billion and Mueller Water Products at 19.2% on $1.46 billion. Federal Signal, the closest comparison in end market, grew 23.3% over the trailing year while Alamo's revenue fell 1.5%, so the profitability gap is not being closed by anyone standing still.

The balance sheet is the reason a patient reading is affordable. Net debt sits at about 0.56 times operating profit, interest is covered roughly eleven times, and the share count has risen only about 0.4% a year across four years, with a $400.0 million revolver undrawn capacity behind it. A company priced for its profitability to halve, financed like this, does not have a solvency question attached to the downside. It has a time question, and time is the one thing a balance sheet like this buys.

Catalysts

The first quarter of 2026 delivered the inflection the story needed and complicated it at the same time. Net sales rose 6.7% to $417.1 million and Vegetation Management posted its first year-over-year quarterly sales increase in nine quarters, with margins improving sequentially as plant execution stabilized. Against that, gross margin fell 118 basis points from a year earlier to 25.1%, held back by continued weakness in municipal mowing and inefficiencies at specific facilities.

Management's commentary was notably careful about what comes next. The framing offered for the year was that 2026 is a stabilizing period rather than a recovery one, with rising input costs and softer conditions in U.S. agriculture cited as the reasons for being a bit more cautious than previously. Industrial Equipment's growth is expected to come mostly from acquisitions, with organic sales roughly flat to up low single digits as the division laps a strong prior year.

Second-quarter results are due after the close on August 3, 2026, with the call the following morning. Two figures carry most of the information. The first is whether Vegetation Management's turn extends to a second quarter, because a single quarter after nine down ones is a data point rather than a trend. The second is gross margin, which has now been the drag for two consecutive reporting periods; the company has attributed it to production inefficiencies it says it is fixing, and a second quarter of decline would move that explanation from operational to structural.

Peer Cohorts (Per Segment, With Filing Citations)

Vegetation Management (reported)

• AGCO (AGCO CORP /DE)
• FY2025 10-K: ; used to plant seeds and apply fertilizer in the field, typically used for row crops, including planting technologies that cover the areas of monitoring and measurement, liquid control and delivery, meter accuracy and seed delivery • Precision agriculture solutions, encompassing retrofit, factory-fit and OEM, that…
• FY2025 10-K: …and end users. We also have other guarantees with our other finance joint ventures. Refer to Note 22 of our Consolidated Financial Statements contained in Item 8, "Financial Statements and Supplementary Data," for additional information. In addition, Rabobank is the primary lender with respect to our credit facility…
• CNH (CNH INDUSTRIAL N.V.)
• FY2025 10-K: …and crop packaging implements. The key factors influencing sales of agricultural equipment include the level of net farm income, the impact of government subsidy programs, and weather and climate conditions. Net farm income is primarily affected by commodity and/or livestock prices, changes in acreage planted, stock…
• FY2025 10-K: …Grand Island Manufacturing Agriculture Hiawatha Manufacturing Agriculture Lebanon Parts Depot Agriculture and Construction New Holland Manufacturing and R&D Center Agriculture Oak Brook Office and R&D Center Agriculture and Construction Racine Office Agriculture and Construction Racine Manufacturing Agriculture Sioux…
• DE (DEERE & CO)
• FY2025 10-K: 023-10-30 2024-10-27 0000315189 us-gaap:OperatingSegmentsMember us-gaap:FinancialServiceMember de:FinancialServicesSegmentMember 2023-10-30 2024-10-27 0000315189 us-gaap:OperatingSegmentsMember us-gaap:FinancialServiceMember de:ConstructionAndForestrySegmentMember 2023-10-30 2024-10-27 0000315189…
• FY2025 10-K: …2024-10-27 0000315189 us-gaap:OperatingSegmentsMember de:SmallAgricultureAndTurfSegmentMember 2023-10-29 0000315189 us-gaap:OperatingSegmentsMember de:ProductionAndPrecisionAgricultureSegmentMember 2023-10-29 0000315189 us-gaap:OperatingSegmentsMember de:FinancialServicesSegmentMember 2023-10-29 0000315189…
• TTC (THE TORO COMPANY)
• FY2025 10-K: …and all-wheel drive articulating tractors, sidewalk snow and ice solution vehicles, and related attachments and accessories. These products are mainly sold through distributors and dealers who market and sell to end-customers primarily consisting of landscape contractors, municipalities, and other government…
• FY2025 10-K: …inventory levels with the anticipated retail demand from end-customers. As a result, our shipment volumes have historically been the highest in our fiscal second quarter, and retail demand for our products is generally highest in our fiscal third quarter. Typically, our accounts receivable balances increase in the…
• GRC (The Gorman-Rupp Company)
• FY2025 10-K: …and noncontrolling interests based upon their respective fair values at the acquisition date. The Company utilizes management estimates and inputs from an independent third-party valuation firm to assist in determining these fair values. The Company uses the income, market or cost approach (or a combination thereof)…
• FY2025 10-K: …over a two-year performance period. The Company issues common stock from treasury upon the vesting of PSUs. The remaining weighted average vesting period of all non-vested PSUs is 1.0 years as of December 31, 2025. Stock-Based Compensation Expense Expense is recognized for all awards of stock-based compensation by…

Industrial Equipment (reported)

• OSK (Oshkosh Corporation)
• FY2025 10-K: …to customer loyalty. The Company provides its salespeople, representatives and distributors with product and sales training on the operation and specifications of its products. The Company's engineers, along with its product managers, develop user-friendly operating manuals and virtual training tools and provide…
• FY2025 10-K: …integration and manufacturing across markets. The Company generated approximately 20% of its net sales in both 2025 and 2024, and 19% in 2023, from sales to the United States (U.S.) government, a substantial majority of which were under multi-year contracts and programs in the defense vehicle market. See Note 24 of…
• TEX (Terex Corporation)
• FY2025 10-K: …utilities and emergency response fleets. 3rd Eye also offers connected compactors and balers. Soft-Pak provides back-office, route management, and customer relations software solutions to the waste and recycling industry. Combined with its in-cab tablet-based applications, Soft-Pak provides refuse fleets with…
• FY2025 10-K: 027 and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. F-16 In November 2025, the FASB issued ASU 2025-08, Financial Instruments - Credit Losses (Topic 326). The amendments in this…
• FSS (FEDERAL SIGNAL CORPORATION)
• FY2025 10-K: …providing the chassis on a timely basis. Certain of the Company's businesses also rely on the availability of inventory supplied by others to meet customer demand. The Company actively manages material supply sourcing and employs various methods to limit risk associated with commodity cost fluctuations and…
• FY2025 10-K: …Way Trucks ("New Way"), and the acquisition of certain assets and operations of Kinloch Equipment & Supply, Inc. ("Kinloch"). Each of these acquisitions is included in the Environmental Solutions reportable segment. See Note 2 - Acquisitions in Item 8, Financial Statements and Supplementary Data , for additional…
• MWA (MUELLER WATER PRODUCTS, INC.)
• FY2025 10-K: …to customer data or harm to our reputation." 23 Table of Contents Index to Financial Statements Item 2. PROPERTIES Our principal properties are listed below. Location Activity Square Footage Owned or leased Albertville, AL Manufacturing 444,000 Owned Ariel, Israel Manufacturing 218,300 Leased Ariel, Israel Research…
• FY2025 10-K: …by and among Walter Industries, Inc., the Walter Affiliates (as defined therein), Mueller Water Products, Inc. and the Mueller Affiliates (as defined therein). Incorporated by reference to Exhibit 10.2 to Mueller Water Products, Inc. Form 8-K (File no. 001-32892) filed on May 30, 2006. 10.3.1+ Mueller Water Products,…
• VMI (VALMONT INDUSTRIES INC)
• FY2025 10-K: …purpose is to conserve resources and improve life. We have been publicly traded since 1968, with our shares listed on the New York Stock Exchange under the ticker symbol "VMI." Segments Our reportable segments are as follows: Infrastructure: This segment consists of the manufacture and distribution of products and…
• FY2025 10-K: ​ ​ ​ ​ ​ ​ Infrastructure ​ Agriculture ​ Total Gross balance as of December 28, 2024 ​ $ 470,988 ​ $ 322,241 ​ $ 793,229 Accumulated impairment losses ​ ( 49,382 ) ​ ( 120,000 ) ​ ( 169,382 ) Balance as of December 28, 2024 ​ 421,606 ​ 202,241 ​ ​ 623,847 Impairment ​ ( 64,869 ) ​ - ​ ( 64,869 ) Foreign currency…

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.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• 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.