Over the past six months, Howmet’s shares (currently trading at $216.50) have posted a disappointing 16.1% loss, well below the S&P 500’s 12% gain. This might have investors contemplating their next move.
Given the weaker price action, is now the time to buy HWM? Find out in our full research report, it’s free.
Why Are We Positive on Howmet?
Inventing the first forged aluminum truck wheel, Howmet (NYSE: HWM) specializes in lightweight metals engineering and manufacturing multi-material components used in vehicles.
1. Skyrocketing Revenue Shows Strong Momentum
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Howmet’s 13.8% annualized revenue growth over the last five years was exceptional. Its growth surpassed the average industrials company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Howmet’s EPS grew at 46.3% compounded annual growth rate over the last five years, higher than its 13.8% 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, Howmet’s margin expanded by 12.7 percentage points over the last five years. This is encouraging because it gives the company more optionality. Howmet’s free cash flow margin for the trailing 12 months was 19.6%.
Final Judgment
These are just a few reasons why Howmet is one of the best industrials companies out there. After the recent drawdown, the stock trades at 37.4× forward P/E (or $216.50 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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