We came across a bullish thesis on Hyster-Yale, Inc. (HY) on Substack by Unemployed Value Degen. In this article, we will summarize the bulls’ thesis on HY. Hyster-Yale, Inc. (HY)’s share was trading at $44.65 as of March 25th. HY’s trailing and forward P/E were 5.55 and 21.28 respectively according to Yahoo Finance.
A forklift lifting a large stack of paperboards in a modern warehouse.
Hyster-Yale (HY) presents an intriguing investment opportunity, though it remains early in its cycle. The company is currently undergoing a product refresh, which has led to increased R&D expenses and a projected sharp decline in GAAP net income for 2025. While this has weighed on the stock price, there is potential for further weakness over the next six months, creating an attractive entry point. If the stock declines further, it could offer a compelling valuation, with the potential for a fourfold return by 2030.
Originally founded in 1840, Hyster-Yale has a long history but is no longer a family-run business. It was sold to NACCO in 1989 and later spun off as a standalone entity in 2012. Despite lacking a true owner-operator structure, the company has an anchoring shareholder in Al Rankin, who has been involved for over 36 years. However, HY has a history of excessive executive compensation, and its capital return policy has been weak, with recent buybacks insufficient to offset stock-based compensation. This dynamic would typically deter investment, but there are operational improvements worth noting.
A key strategic move by HY was the rationalization of its dealer network, which enabled Alta Equipment Group (ALTG) to acquire and optimize several dealerships. Many of these acquisitions were underperforming due to aging owners or lack of succession planning, allowing ALTG to purchase them at attractive multiples. This consolidation effort has led to HY gaining market share despite a challenging industry environment.
HY’s ongoing product cycle transition is a pivotal factor in its outlook. The shift to 5th-generation forklifts emphasizes modularity, which could streamline production and improve customization at the dealership level. Although this shift will weigh on financials in the near term, it positions HY for long-term profitability. Given the longevity of forklifts, a major product refresh is a rare and significant event, and if the market values customization, this could be a meaningful tailwind for both HY and ALTG.
HY has also expanded through acquisitions, including Bolzoni, a major forklift attachment manufacturer in the EMEA region, as well as a telematics company and Nuvera, which focuses on hydrogen fuel cells. The company has deployed automated forklifts with third-party software, signaling its awareness of technological shifts in the industry. This diversification mitigates a major risk for ALTG by ensuring that disruptive innovations don’t bypass the dealership model.
Despite a strong market presence in industrial forklifts, HY’s exposure to electric forklifts remains limited, representing just 6% of revenue despite comprising over half of the global forklift market. This signals an opportunity for growth, particularly through its dealership network. Meanwhile, HY struggled during the post-pandemic supply chain crisis, as rising shipping costs and component shortages compressed margins despite heightened demand. Tariffs and raw material costs remain potential risks, though HY’s U.S. manufacturing presence provides some insulation.
From a valuation perspective, HY has steadily grown revenue per share, rising from $160 in 2014 to $243 today, while the stock price has declined from $76 to $45 over the same period. A return to its historical price-to-sales multiple of 0.5x, from the current 0.19x, would more than double the stock price. However, the near-term headwinds from the product refresh cycle must subside before a meaningful re-rating occurs. Management expects earnings growth to resume in the second half of 2025, but before that, revenue and profits are expected to decline significantly.
Given the underlying business improvements, HY has the potential to be a major long-term compounder. Assuming a successful product transition, continued dealership optimization, and an eventual earnings recovery, the stock could reach $180 by the end of 2030, offering a highly attractive risk/reward profile.
Hyster-Yale, Inc. (HY) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 21 hedge fund portfolios held HY at the end of the fourth quarter which was 15 in the previous quarter. While we acknowledge the risk and potential of HY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.