3 Reasons Investors Love Vertiv (VRT)

The past six months have been a windfall for Vertiv’s shareholders. The company’s stock price has jumped 103%, hitting $336.80 per share. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Following the strength, is VRT a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.

Why Is VRT a Good Business?

Formerly part of Emerson Electric, Vertiv (NYSE:VRT) manufactures and services infrastructure technology products for data centers and communication networks.

1. Core Business Firing on All Cylinders

In addition to reported revenue, organic revenue is a useful data point for analyzing Electrical Systems companies. This metric gives visibility into Vertiv’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.

Over the last two years, Vertiv’s organic revenue averaged 23.7% year-on-year growth. This performance was fantastic and shows it can expand quickly without relying on expensive (and risky) acquisitions.

2. 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, Vertiv’s margin expanded by 22.4 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. Vertiv’s free cash flow margin for the trailing 12 months was 21.2%.

3. New Investments Bear Fruit as ROIC Jumps

We like to invest in businesses with high returns, but the trend in a company’s ROIC can also be an early indicator of future business quality.

Fortunately, Vertiv’s ROIC has increased significantly over the last few years. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.

Final Judgment

These are just a few reasons why Vertiv is a cream-of-the-crop industrials company, and with the recent surge, the stock trades at 48.8× forward P/E (or $336.80 per share). Is now the time to initiate a position? See for yourself in our full research report, it’s free.

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