AZZ has been treading water for the past six months, recording a small return of 2.5% while holding steady at $86.20. The stock also fell short of the S&P 500’s 10.9% gain during that period.
Given the weaker price action, is now a good time to buy AZZ? Or should investors expect a bumpy road ahead? Find out in our full research report, it’s free.
Why Are We Positive On AZZ?
Responsible for projects like nuclear facilities, AZZ (NYSE:AZZ) is a provider of metal coating and power infrastructure solutions.
1. Long-Term Revenue Growth Shows Strong Momentum
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one sustains growth for years. Thankfully, AZZ’s 10.3% annualized revenue growth over the last five years was solid. Its growth beat the average industrials company and shows its offerings resonate with customers.
2. Operating Margin Rising, Profits Up
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Looking at the trend in its profitability, AZZ’s annual operating margin rose by 6 percentage points over the last five years, as its sales growth gave it immense operating leverage. Its operating margin for the trailing 12 months was 15.2%.
3. Long-Term EPS Growth Is Outstanding
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
AZZ’s EPS grew at a spectacular 16.3% compounded annual growth rate over the last five years, higher than its 10.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
These are just a few reasons why we think AZZ is a high-quality business. With its shares trailing the market in recent months, the stock trades at 16.9x forward price-to-earnings (or $86.20 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
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