Oshkosh has been treading water for the past six months, recording a small loss of 4.4% while holding steady at $131.59. The stock also fell short of the S&P 500’s 21.1% gain during that period.
Is now the time to buy Oshkosh, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Oshkosh Not Exciting?
We don’t have much confidence in Oshkosh. Here are three reasons why OSK doesn’t excite us, plus one stock we’d rather own.
1. Backlog Declines as Orders Drop
We can better understand Heavy Transportation Equipment companies by analyzing their backlog. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into Oshkosh’s future revenue streams.
Oshkosh’s backlog came in at $14.75 billion in the latest quarter, and it averaged 3.3% year-on-year declines over the last two years. This performance was underwhelming and shows the company is not winning new orders. It also suggests there may be increasing competition or market saturation. 
2. Low Gross Margin Reveals Weak Structural Profitability
At StockStory, we prefer high gross margin businesses because they indicate the company has pricing power or differentiated products, giving it a chance to generate higher operating profits.
Oshkosh has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 16.3% gross margin over the last five years. Said differently, Oshkosh had to pay a chunky $83.70 to its suppliers for every $100 in revenue.
3. EPS Took a Dip Over the Last Two Years
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Sadly for Oshkosh, its EPS declined by 11.9% annually over the last two years while its revenue grew by 1.2%. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
Oshkosh 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 10.2× forward P/E (or $131.59 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We’re fairly confident there are better investments elsewhere. Let us point you toward the most dominant software business in the world.
Stocks We Would Buy Instead of Oshkosh
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