What a time it’s been for Gorman-Rupp. In the past six months alone, the company’s stock price has increased by a massive 67.1%, reaching $75.85 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now still a good time to buy GRC? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Is Gorman-Rupp a Good Business?
Powering fluid dynamics since 1934, Gorman-Rupp (NYSE: GRC) has evolved from its Ohio origins into a global manufacturer and seller of pumps and pump systems.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Gorman-Rupp grew its sales at an exceptional 14.9% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
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.
Gorman-Rupp’s spectacular 15.6% annual EPS growth over the last five years aligns with its revenue performance. This tells us its incremental sales were profitable.
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, Gorman-Rupp’s margin expanded by 6.2 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. Gorman-Rupp’s free cash flow margin for the trailing 12 months was 12.7%.
Final Judgment
These are just a few reasons Gorman-Rupp is a rock-solid business worth owning, and after the recent rally, the stock trades at $75.85 per share (or a trailing 12-month price-to-sales ratio of 2.9×). Is now the time to buy despite the apparent froth? See for yourself in our comprehensive research report, it’s free.
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