On November 28, 2023, Ingersoll Rand Inc (IR, Financial) experienced a slight dip in its stock price, closing at $70.78 per share, which represents a 0.77% decline. However, taking a step back to analyze its performance over the past three months reveals a modest gain of 2.76%. Amidst these fluctuations, the company boasts an Earnings Per Share (EPS) of $1.87. This begs the question: is Ingersoll Rand (IR) fairly valued in the market? This article aims to provide investors with a thorough valuation analysis to answer that very question.
Company Introduction
Ingersoll Rand was formed from the merger of Gardner Denver and the industrial segment of the original Ingersoll Rand. Today, it stands as a diversified industrial company with a focus on industrial technologies and services as well as precision and science technologies. The company caters to a wide range of end markets, including the industrial, medical, and energy sectors, offering a broad spectrum of products in compression, blower and vacuum, and fluid management. In 2022, Ingersoll Rand generated approximately $5.9 billion in revenue. With a current market cap of $28.70 billion and sales of $6.70 billion, the company's financials are robust. But how does this translate to its stock value?
When comparing Ingersoll Rand's stock price to the GF Value, an estimated fair value of $69.66, we can initiate a deeper exploration into the company's intrinsic value, integrating financial assessment with key company details.
Summarize GF Value
The GF Value is a proprietary measure that reflects the intrinsic value of a stock, considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, as well as future business performance estimates. According to this metric, Ingersoll Rand (IR, Financial) is currently fairly valued. This implies that the stock's price is in alignment with its GF Value, suggesting that its future returns are likely to mirror the company's business growth rate.
Link: These companies may deliver higher future returns at reduced risk.
Financial Strength
Before investing, it's crucial to assess a company's financial strength. A strong financial foundation reduces the risk of permanent loss. Ingersoll Rand's cash-to-debt ratio stands at 0.43, which, although not top-tier within the Industrial Products sector, suggests fair financial health. The company's overall financial strength, rated at 7 out of 10, supports this fair assessment.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, tends to be less risky. Ingersoll Rand has demonstrated profitability over the past five years, with a notable operating margin of 17.63%, outperforming 87.59% of its peers in the Industrial Products industry. This solid profitability, coupled with a growth rate that surpasses 73.17% of the industry, establishes Ingersoll Rand as a company with fair profitability and promising growth prospects.
ROIC vs WACC
An insightful way to evaluate a company's profitability is by comparing its Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC). A higher ROIC compared to WACC often indicates value creation for shareholders. Ingersoll Rand's ROIC over the past year stands at 7.46%, while its WACC is 12.26%, suggesting a need for improvement in this area.
Conclusion
Ingersoll Rand (IR, Financial) presents itself as a fairly valued stock with a solid financial foundation and respectable profitability. Its growth is commendable within the Industrial Products industry. For a detailed look into the company's financials, investors can explore Ingersoll Rand's 30-Year Financials here.
Screener Link
To discover high-quality companies that may deliver above-average returns, consider using the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
