Trimble’s stock price has taken a beating over the past six months, shedding 26.3% of its value and falling to $55.66 per share. This may have investors wondering how to approach the situation.
Is now the time to buy Trimble, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Trimble Not Exciting?
Even with the cheaper entry price, we don't have much confidence in Trimble. Here are three reasons why TRMB doesn't excite us and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Trimble’s 2.6% annualized revenue growth over the last five years was sluggish. This was below our standards.
2. Slow Organic Growth Suggests Waning Demand In Core Business
In addition to reported revenue, organic revenue is a useful data point for analyzing Internet of Things companies. This metric gives visibility into Trimble’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Trimble’s organic revenue averaged 7.1% year-on-year growth. This performance slightly lagged the sector and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations. 
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Trimble historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.3%, somewhat low compared to the best industrials companies that consistently pump out 20%+.
Final Judgment
Trimble isn’t a terrible business, but it doesn’t pass our quality test. Following the recent decline, the stock trades at 15× forward P/E (or $55.66 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better investments elsewhere. We’d recommend looking at the most entrenched endpoint security platform on the market.
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