Over the past six months, AMETEK has been a great trade, beating the S&P 500 by 19.8%. Its stock price has climbed to $229.75, representing a healthy 25.8% increase. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now still a good time to buy AME? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Do Investors Watch AME Stock?
Started from its humble beginnings in motor repair, AMETEK (NYSE: AME) manufactures electronic devices used in industries like aerospace, power, and healthcare.
Three Positive Attributes:
1. Long-Term Revenue Growth Shows Strong Momentum
Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, AMETEK’s sales grew at a solid 10.3% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.
2. Operating Margin Reveals a Well-Run Organization
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
AMETEK has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 25.1%. This result isn’t too surprising as its gross margin gives it a favorable starting point.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
AMETEK has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 21.5% over the last five years.
Final Judgment
There are definitely things to like about AMETEK, and with its shares beating the market recently, the stock trades at 28.6× forward P/E (or $229.75 per share). Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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