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IMI Should Manage to Sustain Profits

A weaker economic backdrop may slow IMI's growth, but high ROICs should persist

Daniel Holland 5 January, 2012 | 4:34PM

IMI Group (IMI) delivers highly engineered products for customers, providing the backbone of several integral processes within industrial plants. By focusing on niche products and actively engaging customers on a regular basis, the company is able to deliver strong free cash flows and returns on invested capital. We think this narrow-moat company has several growth paths which should generate healthy returns for shareholders over the long run.

IMI's strong free cash flow potential and high invested capital returns reflect the company's competitive advantages and successful execution of value-creating strategies. We expect capital spending among IMI Group's end markets to remain high after a precipitous drop in spending during the recession. As firms look to upgrade facilities and maintain low-cost bases, we think IMI's value-engineering approach will resonate with customers. Over the long run, we think the profits of IMI can be sustained due to the firm's relationship with customers and global scale, helping to solidify the company's narrow economic moat.

Morningstar Analyst Notes and Research are available to Premium subscribers. Sign up for a free two-week trial for instant access to the full research report for IMI Group, including our fair value estimate and economic moat.

 

 

 

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Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
IMI PLC1,436.00 GBX0.07-
About Author

Daniel Holland  Daniel Holland is a stock analyst with Morningstar.