Joy Global (JOY) maintains value through its domestic aftermarket recurring-revenue strategy, and it has begun shifting its coal-mining equipment strategy to sell more to China, which currently consumes 50% of global coal and is expected to increase its energy needs going forward, says Michael McCloskey, President and Founder at GreensKeeper Asset Management Inc.
“[China’s] coal market is about four times the size of the U.S. market, so even if the U.S. market declines by 10% a year, Joy Global is going to make that up through exports, because the U.S. is a lower-cost producer than the Chinese,” McCloskey said. “Long-term, coal is still a decent story.”
McCloskey says that despite’s JOY‘s recent drop in stock price due to low natural gas prices, the stock maintains a baseline of value and is expected to grow in the next few years. He says the company recently engaged in acquisitions in China, and he says the company can prove a good value investment.
“Joy Global earned $7.22 last year, and this fiscal year it is going to be lower. But they’ll still earn $6.24, and we think paying 10 times earnings for a company whose earnings are likely to be materially higher five years from now is wise. They’re starting to make acquisitions, too. They bought a company in China last year for about $1.1 billion,” McCloskey said.
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