Over the past six months, SPX Technologies’s stock price fell to $204.50. Shareholders have lost 9.1% of their capital, which is disappointing considering the S&P 500 has climbed by 11.6%. This might have investors contemplating their next move.
Given the weaker price action, is this a buying opportunity for SPXC? Find out in our full research report, it’s free.
Why Is SPX Technologies a Good Business?
With roots dating back to 1912 as the Piston Ring Company, SPX Technologies (NYSE:SPXC) supplies specialized infrastructure equipment for HVAC systems and detection and measurement applications across industrial, commercial, and utility markets.
1. Operating Margin Rising, Profits Up
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.
Analyzing the trend in its profitability, SPX Technologies’s operating margin rose by 10.7 percentage points over the last five years, as its sales growth gave it immense operating leverage. Its operating margin for the trailing 12 months was 16.2%.
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.
SPX Technologies’s EPS grew at 22.4% compounded annual growth rate over the last five years, higher than its 15.6% 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, SPX Technologies’s margin expanded by 11.4 percentage points over the last five years. This is encouraging because it gives the company more optionality. SPX Technologies’s free cash flow margin for the trailing 12 months was 12.4%.
Final Judgment
These are just a few reasons why we think SPX Technologies is one of the best industrials companies out there. After the recent drawdown, the stock trades at 22.2× forward P/E (or $204.50 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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