In April 2021, Cathie Wood began to invest heavily in Trimble, buying over 760,000 shares of the stock. At the time, this purchase was roughly valued at $63 million.
A couple of months later, Wood went ahead and bought over 220,000 more shares. So, why did Wood begin to invest heavily in TRMB stock?
- Trimble is highly diversified and has a myriad of growth drivers that should help the company to explode through further digital technology adoption.
- As higher-margin software and services become a more significant part of Trimble’s sales mix, the company’s margins and free cash flow generation should greatly expand.
- As the company’s quality of earnings improves and a growing percentage of its revenue comes from recurring sources, a higher premium may be placed on it.
Yet Wood’s latest trades suggest Trimble has fallen out of favor with her. This is in spite of Trimble’s key growth drivers residing in the industries of surveying, mapping, construction engineering, field navigation, crop management, and real-time fleet management. The technology that Trimble is bringing to these sectors is truly revolutionary.
Founded in 1978, Trimble Inc. is a software, hardware, and service technology company headquartered in Sunnyvale, California. Trimble sells products and services that are used in land surveying, construction, agriculture, transportation, telecommunication, asset tracking, mapping, railways, utilities, and mobile resource management.
Trimble operates through four main segments:
- Buildings and Infrastructure,
- Resources and Utilities, and
The Buildings and Infrastructure segment is utilized by architects, engineers, and contractors. The Geospatial segment is primarily utilized by clients working in surveying, engineering, and government. The Resources and Utilities segments serve clients in agriculture, forestry, and utilities. The Transportation segment of Trimble serves clients who deal with long-haul trucking, field service management, rail, and construction logistics industries.
The company has been attracting attention of late because of one high profile investor: Cathie Wood. So what does she see in the company that aligns with her thesis of disruptive innovation?
Trimble Revenue & Growth
During Trimble’s Q3 2021 Earnings Call, company executives discussed the revenue Trimble has been able to achieve lately while also highlighting areas in which the company is suspected to grow. Trimble President and CEO Robert G. Painter shared this about the company’s revenue, “We exceeded our expectations and delivered record ARR of $1.36 billion, up to eight percent year-over-year and up 11% on an organic basis. Total revenue growth of 14%, EBITDA margin of 25.9%, and trailing 12-month operating cash flow of $784 million. We achieved record third-quarter levels of revenue in many of our businesses with another exceptionally strong quarter in machine control and civil construction, guidance in agriculture, and survey and mapping.”
In terms of growth, supply chain issues have been a continued issue for the company as of late. In regard to this issue, Painter told shareholders, “On the basis of this collective strength, we are raising our annual earnings guidance despite a tightening supply chain environment. We remain optimistic that the infrastructure bill will ultimately be passed in the United States, which would bolster our long-term outlook in our construction and surveying businesses, starting at some point in 2023.”
Trimble is involved in a number of different sectors. The company has a variety of competitors as well. Some of Trimble’s most prominent competitors include:
- Raven Industries
- John Deere
- McLeod Software
- Faro Technologies
- Leica Camera
What Could Go Wrong?
While Trimble has the potential for high growth, the stock also carries some risk. During an Earnings Call, Trimble’s Chief Financial Officer David Barnes shared the message, “We’re going to see more inflation than we had anticipated in the first half of 2022 as high raw material prices and supply chain issues continue through 2022.”
Ultimately, supply chain issues are likely to continue to cause setbacks for the company for multiple quarters, causing risk for the company.
Is Trimble A Buy?
All things considered, Trimble stock is looking like an attractive “buy on the dip” candidate. The stock is near its 52-week low and has lots of growth drivers.
From our analysis examining cash flows, Trimble has upside potential to $76.72 per share, which represents the company’s intrinsic value or fair market value. Analysts are more optimistic and have placed a consensus target price of $93 per share on the company. In either case, there’s upside for the patient investor, even if Cathie Wood has lost faith.
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.