Ingersoll Rand currently trades at $81.98 per share and has shown little upside over the past six months, posting a middling return of 3.7%.

Is now the time to buy Ingersoll Rand, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Is Ingersoll Rand Not Exciting?

We're swiping left on Ingersoll Rand for now. Here are three reasons you should be careful with IR and a stock we'd rather own.

1. Core Business Falling Behind as Demand Declines

We can better understand Gas and Liquid Handling companies by analyzing their organic revenue. This metric gives visibility into Ingersoll Rand’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, Ingersoll Rand’s organic revenue averaged 2.3% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Ingersoll Rand might have to lean into acquisitions to grow, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus).

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Ingersoll Rand’s revenue to rise by 4%, close to its 7.3% annualized growth for the past five years. This projection doesn't excite us and implies its newer products and services will not catalyze better top-line performance yet.

3. Previous Growth Initiatives Haven’t Impressed

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Ingersoll Rand historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 5.9%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

Final Judgment

Ingersoll Rand isn’t a terrible business, but it doesn’t pass our bar. That said, the stock currently trades at 24.1× forward P/E (or $81.98 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at our favorite semiconductor picks and shovels play.

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