Oshkosh’s 12.8% return over the past six months has outpaced the S&P 500 by 9.7%, and its stock price has climbed to $156.46 per share. This run-up might have investors contemplating their next move.
Is there a buying opportunity in Oshkosh, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Oshkosh Not Exciting?
We’re happy investors have made money, but we're swiping left on Oshkosh for now. Here are three reasons you should be careful with OSK and a stock we'd rather own.
1. Backlog Declines as Orders Drop
Investors interested in Heavy Transportation Equipment companies should track backlog in addition to reported revenue. 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 $14.18 billion in the latest quarter, and it averaged 5.7% 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
Gross profit margin is a critical metric to track because it sheds light on its pricing power, complexity of products, and ability to procure raw materials, equipment, and labor.
Oshkosh has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 16.5% gross margin over the last five years. Said differently, Oshkosh had to pay a chunky $83.50 to its suppliers for every $100 in revenue. 
3. Recent EPS Growth Below Our Standards
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.
Oshkosh’s unimpressive 4.5% annual EPS growth over the last two years aligns with its revenue trend. This tells us it maintained its per-share profitability as it expanded.
Final Judgment
Oshkosh’s business quality ultimately falls short of our standards. With its shares topping the market in recent months, the stock trades at 13.7× forward P/E (or $156.46 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at our favorite semiconductor picks and shovels play.
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