Is Trimble Stock a Buy, Sell or Hold?

Trimble (NASDAQ:TRMB) is a hardware and software tech company that specializes in providing tools and services to industries such as construction, agriculture, transportation and forestry. It creates precision hardware that can track and measure physical assets, then using the data generated to deliver insights for its customers.

Unsurprisingly, this data and tech-driven approach to improving efficiency in the real world could make Trimble a good long-term investment. With the world rapidly turning to data analytics and AI tools to enhance businesses in practically every industry, Trimble’s leading edge may make it an under-appreciated growth company.

So, is Trimble worth a nibble today, or are there better opportunities for investors to look at elsewhere?

Why Could Trimble Be a Solid Growth Stock?

As a service provider to numerous large industries, Trimble is taking advantage of growing demand for advanced software to improve efficiency and deliver real-world benefits to companies.

In 2024, software revenues made up a record part of its total. Gross margin for the full year also hit a record high of 65.1%, exceeded even further by the 69.3% gross margin reported for the fourth quarter.

This focus on software sales helped to drive Trimble’s ARR up 14% in Q4 to a total of $2.26 billion in spite of a 3% reduction in year-over-year revenues to $3.68 billion for the full year of 2024.

As recurring revenue on high-margin software products continues to become a larger and larger part of Trimble’s revenue mix, the company is likely to see its bottom line grow steadily. Over the next five years, Street analysts forecast Trimble’s EPS will expand at an annualized rate of about 10%.

The benefits of Trimble’s increasing focus on software can readily be seen in Q4’s revenue breakdown. During that quarter, Trimble generated revenues of $288.9 million on products and $694.5 million on subscriptions and services.

The cost of sales, however, was $153.6 million on products and just $130.0 million on subscriptions and services. This being the case, it’s clear that the growing subscription and service part of Trimble’s business offers a vastly superior ROI.

Speaking of ROI, Trimble is also impressive when it comes to its return on invested capital. The company’s trailing 12-month ROIC is 20.2%, while its return on equity is 28.8%. Both of these metrics are deeply positive for shareholders, as high ROIC and ROE are typically associated with positive returns in the stock market.

Trimble made a key decision to sell off its transportation telematics business to Platform Science. As part of the deal, Trimble became a partner in Platform Science and gained a seat on the company’s board of directors.

Trimble further grew its footprint in agriculture in 2024 by entering into a joint venture with AGCO called PTx Trimble. While Trimble is the minority in the deal, and only owns 15% of this joint venture, expect further focus on high-tech agricultural solutions like precision spraying and crop data management will benefit Trimble in the long run as farmers increasingly adopt cutting-edge technologies.

A final factor to support EPS growth and higher share prices for investors is the company’s share buyback program. The number of outstanding TRMB shares has fallen on a year-over-year basis in all but one quarter since 2022. Alongside the full-year results for 2024, management also announced a new authorization for up to $1 billion in share repurchases.

Is Trimble Attractive to Value Investors?

At first glance, Trimble appears to be actively undervalued for a company with promising growth prospects. TRMB trades at 11.3x trailing earnings, 4.6x sales and 3.0x book value.

Relative to the earnings multiples we see broader indices trading at, this hints at undervaluation for a business that is actively growing and has a promising future ahead of it.

The situation becomes slightly more complex, though, when we turn our heads to view Trimble’s forward guidance. In 2025, management expects to deliver EPS of $1.46 to $1.67, far below the $6.09 it generated in 2024.

Using non-GAAP EPS to smooth out the effects of divestitures and the creation of its joint venture with AGCO, they expect to see earnings go from $2.85 in 2024 to $2.76-$2.98 in 2025.

Using the mid-point of this range, TRMB would trade at about 24x adjusted forward earnings. While certainly not out of line given Trimble’s ability to deliver on the bottom line P&L, the stock isn’t quite as cheap as it first appears once these factors are taken into account.

Is Now the Time to Buy Trimble?

Trimble is a Buy according to 6 of the 7 analysts covering it with a consensus price target 27.8% higher at $88.27 per share.

To support the Street’s view, it’s clear that management is laser-focused on margins as evidenced by the fact that gross margin reached a record high in 2024. Persistent ARR growth is going to support Trimble shares rising for quite some time as earnings mushroom.

Trimble is also repaying long-term debt and the leadership team succeeded in lower debt obligations by over 50% last year when compared to the peak in the middle of 2023. The balance sheet now has $738.8 million on cash and cash equivalents on hand.

For those looking to snap up a very profitable and high margin business, Trimble is a candidate for a long-term buy-and-hold. Sure, the growth may not be explosive, but Trimble has all the hallmarks of a business that will compound well over many years. As ARR grows steadily through software and service sales, profits should follow and Trimble is likely to reward for shareholders long into the future.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.