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Insider activity and especially insider buying has dwindled to next to nothing over the last few days as companies prepare to start reporting their first quarter earnings. The crop of purchases from last week weren’t particularly interesting and the only one that stood out was a steady Eddy industrial filtration firm called Donaldson Company (DCI). The company makes filters used in aircraft, heavy industrial machinery, trucks, construction equipment and more recently in life sciences through an acquisition.
The company operates in over forty countries and has been paying a dividend for over 60 consecutive years. Looking at the company’s dividend history over the last thirty years, they have been conservative with their dividends and there were multiple instances where they dropped their dividend without fully eliminating it. The current dividend yield is 1.45% with a payout ratio of 31%.
The company beat earnings estimates in the last two quarters and revenue growth in seven out of the last eight quarters was in the double digits. This helped the stock notch gains of over 25% during the last year compared to a loss of almost 6% for the S&P 500. Revenue during the trailing twelve months was $3.42 billion and net income was $357 million translating to a net margin north of 10%.
The company has provided a long-term forecast of $3.8 billion to $4.3 billion in revenue by fiscal 2026, ending in July 2026. The company has also guided towards operating margin of 15.6% to 16.4%. Operating margin during the trailing twelve months was 14.33%. At the mid-point of its revenue range, we get $4.05 billion in revenue at 16% operating margin. If this translates to 12% net margin, we get $486 million in net income in a little over three years. The company’s enterprise value is $8.12 billion, implying the stock is trading at about 17 times fiscal 2026 estimated earnings.
While this is decent for a company with single digit revenue growth and double digit net margin, it isn’t particularly exciting. Independent Director Christopher M. Hilger, who has served on the Board of Directors since 2021 does not share my opinion. He decided to pick up nearly $200,000 worth of shares on the open market, making this the first insider purchase at the company in the last four years. I will revisit the company if I see its growth through acquisitions strategy generate better than expected growth or earnings in the coming years.