What a fantastic six months it’s been for Powell. Shares of the company have skyrocketed 163%, hitting $294.28. This performance may have investors wondering how to approach the situation.
Is now still a good time to buy POWL? Or is this a case of a company fueled by heightened investor enthusiasm? 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
Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Powell grew its sales at an incredible 19.8% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
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.
Powell’s EPS grew at 98.3% compounded annual growth rate over the last five years, higher than its 19.8% 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
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.
As you can see below, Powell’s margin expanded by 22.8 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 17%.
Final Judgment
These are just a few reasons why Powell is a cream-of-the-crop industrials company, and with the recent rally, the stock trades at 53× forward P/E (or $294.28 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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