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Following Oil Higher

Friday, 20 Jun 2008 | 6:12 PM ET

Gardner Denver didn’t follow oil’s increase in price Friday, despite the company’s exposure to the commodity. That value gap is the perfect opportunity for investors, Cramer told viewers during Mad Money.

Discussing Gardner Denver
An outlook on Gardner Denver, with Mad Money host Jim Cramer.

This is one of his new-tech stocks. Gardner Denver makes compressors, blowers, industrial vacuum pumps and fluid-transfer products – all things needed for extracting oil – but the company makes them better, smaller and more energy-efficient than its competitors.

GDI’s success can be measured in market share. It’s number one or two in most of its businesses.

Between the strength of the overall company and Gardner Denver’s oil-related business alone, you’d think the stock is a buy. But here’s another reason: Cramer said the earnings estimates and the multiple are too low.

GDI’s trading at 13 times a $4 forward earnings estimate, 50 cents below where Cramer thinks it should be. And that multiple is below the rest of GDI’s peers. Give the stock the same multiple as the rest of its cohort, and GDI trades up to $65. That’s a 20% bump from where it is now.

How confident is Cramer that Gardner Denver will hit that mark?

“I expect [GDI] to hit the mid-$60s -- 14, 15 points higher maybe -- just by year end,” he said.



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