TNC

Tennant is the global leader in floor-cleaning equipment with a large direct sales/service network and a recurring parts-and-consumables stream — a durable, unglamorous franchise. FY2025 was a clear trough, not a structural break: net income fell 47.7% to $43.8M and diluted EPS dropped 46.1% to $2.36, but the MD&A pins much of the damage on the November 2025 North America ERP go-live, which 'resulted in the loss of three weeks of machine order entry and parts shipping capability' and disrupted manufacturing scheduling, with effects bleeding into early 2026. Layered on top were tariff-driven input costs and mixed global demand. The collapse in operating margin to 5.7% (from a business that earned $110M net in FY2023) is therefore part one-time, part cyclical — December was already improving and management notes organic growth returned in China, EMEA and APAC late in the year.

The problem is valuation. At $87.24 the stock trades at 37x trailing EPS — but that EPS is depressed. Normalizing toward the FY2024 level (~$4.38/share, implied by the -46.1% EPS move) puts the multiple near 20x, and P/S is a modest 1.3x. So the market is already looking through the trough: you are not paying a distressed price for a recovery, you are paying a fair-to-full price for one. That caps upside and leaves the stock exposed if the ERP recovery or demand normalization slips.