Shares of a leading mechanized cleaning equipment manufacturer tennant (TNC -4.99%) It was down 5% today as of 4pm ET on Friday, according to data provided by . S&P Global Market Intelligence.

The Dividend King reported third-quarter earnings on Thursday afternoon, slightly missing analysts’ expectations on both the top and bottom lines, leading to a decline in today’s share price.

Tennant’s focus on autonomous mobile robots

While Tennant’s sales and adjusted earnings per share growth of 3% and 4% in the quarter appear lackluster, there are reasons for optimism for investors.

First of all, the company Focus on the production of autonomous mobile robots (AMR) Products designed to clean and scrub appear to be gaining traction. Earlier this year, Tennant launched its latest AMR cleaning machine, the X4 ROVR, and has already recorded sales of over 2,200 AMR units in the first three quarters of the year.

Before 2024, the company had only sold a total of 6,500 AMRs; This demonstrates the company’s rapid shift towards technology-intensive offerings. These AMR units, which currently account for 5% of the company’s total sales in the first nine months of 2024, are particularly valuable to investors due to the benefits they provide to the company. annual recurring revenue from software subscriptions.

This recurring revenue comes in addition to other semi-recurring sales such as parts, supplies and services, which account for 36% of Tennant’s sales.

Second, while Tennant’s 3% sales growth in the third quarter doesn’t appear to offer market-beating potential, the company’s cheap valuation may suggest otherwise. Turning around Tennant’s free cash flow discount cash flow calculator It shows that the company only needs to consistently grow sales by 3% to justify its current share price.

So is Tennant something to buy?

Investors should not overreact to this situation as the company announced that it is increasing production capacity for AMRs due to heavy order flow. Dividend KingThere is a decrease in share prices today.