Griffon has been treading water for the past six months, recording a small return of 1.6% while holding steady at $76.16. The stock also fell short of the S&P 500’s 18.4% gain during that period.
Is now the time to buy GFF? Or does the price properly account for its business quality and fundamentals? Find out in our full research report, it’s free.
Why Does GFF Stock Spark Debate?
Initially in the defense industry, Griffon (NYSE: GFF) is a now diversified company specializing in home improvement, professional equipment, and building products.
Two Positive Attributes:
1. 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.
Griffon’s EPS grew at an astounding 28.8% compounded annual growth rate over the last five years, higher than its 1.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
2. Increasing Free Cash Flow Margin Juices Financials
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Griffon’s margin expanded by 13 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. Griffon’s free cash flow margin for the trailing 12 months was 12.4%.
One Reason to be Careful:
Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Griffon’s sales grew at a sluggish 1.6% compounded annual growth rate over the last five years. This wasn’t a great result, but there are still things to like about Griffon.
Final Judgment
Griffon’s positive characteristics outweigh the negatives. With its shares underperforming the market lately, the stock trades at 12.4× forward P/E (or $76.16 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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