Trimble: Priced Like Hardware, Performing Like Software
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AMO Research385 FollowersFollow5ShareSavePlay(11min)CommentsSummaryTrimble Inc. (TRMB) earns a buy rating as it transitions from hardware to high-margin industrial software, with the market underpricing this strategic shift. TRMB's AECO segment drives 17% YoY ARR growth, with 63% recurring revenues and strong cross-selling via its 'Connect & Scale' strategy. Margin expansion is evident: adjusted EBITDA margin reached 29.9%, with management targeting $3B ARR, $4B revenue, and 30% EBITDA margin by 2027. TRMB trades at a 20x forward EV/EBITDA, below software peers, offering a potential 25% upside as the market re-rates its software-driven profile. JHVEPhoto/iStock Editorial via Getty Images I will give a buy rating to Trimble Inc. (TRMB) as the company is transitioning from its previous hardware provider activity to a higher margin industrial software compounder. I believe that the market isThis article was written byAMO Research385 FollowersFollowI am a dynamic finance professional with a Master’s in Banking & Finance from Université Paris 1 Panthéon-Sorbonne. My investing background mix corporate finance, M&A, and investment analysis, with a focus on real estate, renewable energy, and equity markets. I specialize in financial modelling, valuation, and qualitative analysis, demonstrated with hands-on roles in private equity, asset management and Real Estate.
On Seeking Alpha, I aim to write about companies I find interesting sharing my insights and analysis with a global audience, and to debate my ideas in a will of continuous improvement. Motivated by empowering informed decisions, I’m excited to connect with readers and grow as a thought leader in finance.Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.Quick InsightsHow does TRMB’s strategic shift impact its valuation and upside potential?TRMB's pivot to high-margin software is not fully reflected in its 20x EV/EBITDA multiple, presenting a 25% upside as it converges with software peers trading closer to 25x.What are the key growth drivers and margin trends in TRMB’s AECO and Field Systems segments?AECO delivers 17% ARR growth and 31.8% operating margin, while Field Systems posts 18% ARR growth and 33.4% margin, both exceeding SaaS 'rule of 40' benchmarks.How does TRMB’s balance sheet position support future capital allocation?With net leverage at 1.2x (well below its 2.5x target), TRMB has ample capacity for buybacks and M&A, reinforcing its growth and shareholder return potential.Recommended For You