Powell has been on fire lately. In the past six months alone, the company’s stock price has rocketed 427%, setting a new 52-week high of $547.80 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Following the strength, is POWL a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.
Why Are We Positive On POWL?
Originally a metal-working shop supporting local petrochemical facilities, Powell (NYSE: POWL) has grown from a small Houston manufacturer to a global provider of electrical systems.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Powell grew its sales at an incredible 17.8% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Powell’s EPS grew at 67.7% compounded annual growth rate over the last five years, higher than its 17.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Increasing Free Cash Flow Margin Juices Financials
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Powell’s margin expanded by 22 percentage points over the last five years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Powell’s free cash flow margin for the trailing 12 months was 14.5%.
Final Judgment
These are just a few reasons why we're bullish on Powell, and with the recent surge, the stock trades at 96.4× forward P/E (or $547.80 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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