While the S&P 500 is up 18.8% since April 2025, Alamo (currently trading at $190.90 per share) has lagged behind, posting a return of 6.2%. This might have investors contemplating their next move.
Is there a buying opportunity in Alamo, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Is Alamo Not Exciting?
We're swiping left on Alamo for now. Here are three reasons there are better opportunities than ALG and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, Alamo’s sales grew at a mediocre 6.7% compounded annual growth rate over the last five years. This was below our standard for the industrials sector.
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Alamo’s revenue to rise by 5.1%. Although this projection indicates its newer products and services will spur better top-line performance, it is still below average for the sector.
3. EPS Took a Dip Over the Last Two Years
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Sadly for Alamo, its EPS declined by 2.1% annually over the last two years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Alamo’s low margin of safety could leave its stock price susceptible to large downswings.
Final Judgment
Alamo isn’t a terrible business, but it doesn’t pass our bar. With its shares trailing the market in recent months, the stock trades at 16.4× forward P/E (or $190.90 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at one of Charlie Munger’s all-time favorite businesses.
Stocks We Would Buy Instead of Alamo
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
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