Over the past six months, Donaldson’s shares (currently trading at $85.86) have posted a disappointing 6.7% loss, well below the S&P 500’s 10.9% gain. This might have investors contemplating their next move.
Is now the time to buy Donaldson, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Donaldson Not Exciting?
Even though the stock has become cheaper, we’re cautious about Donaldson. Here are three reasons we avoid DCI, plus one stock we’d rather own.
1. Weak Constant Currency Growth Points to Soft Demand
In addition to reported revenue, constant currency revenue is a useful data point for analyzing Gas and Liquid Handling companies. This metric excludes currency movements, which are outside of Donaldson’s control and are not indicative of underlying demand.
Over the last two years, Donaldson’s constant currency revenue averaged 3% year-on-year growth. This performance was underwhelming and suggests it might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability. 
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Donaldson’s revenue to rise by 6.9%. Although this projection implies its newer products and services will fuel better top-line performance, it is still below the sector average.
3. New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
Over the last few years, Donaldson’s ROIC averaged 1.6 percentage point decreases each year. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
Donaldson isn’t a terrible business, but it doesn’t pass our quality test. After the recent drawdown, the stock trades at 12.9× forward EV-to-EBITDA (or $85.86 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We’re fairly confident there are better investments elsewhere. Let us point you toward the most dominant software business in the world.
Stocks We Would Buy Instead of Donaldson
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
