Shareholders of Vertiv would probably like to forget the past six months even happened. The stock dropped 32.9% and now trades at $72.08. This may have investors wondering how to approach the situation.
Following the drawdown, is now a good time to buy VRT? Find out in our full research report, it’s free.
Why Is Vertiv a Good Business?
Formerly part of Emerson Electric, Vertiv (NYSE: VRT) manufactures and services infrastructure technology products for data centers and communication networks.
1. Core Business Firing on All Cylinders
In addition to reported revenue, organic revenue is a useful data point for analyzing Electrical Systems companies. This metric gives visibility into Vertiv’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, Vertiv’s organic revenue averaged 19.7% year-on-year growth. This performance was fantastic and shows it can expand quickly without relying on expensive (and risky) acquisitions. 
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.
Vertiv’s EPS grew at an astounding 44.8% compounded annual growth rate over the last five years, higher than its 12.6% 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
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, Vertiv’s margin expanded by 10.4 percentage points over the last five years. This is encouraging because it gives the company more optionality. Vertiv’s free cash flow margin for the trailing 12 months was 14.3%.
Final Judgment
These are just a few reasons why we're bullish on Vertiv. With the recent decline, the stock trades at 20× forward price-to-earnings (or $72.08 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More Than Vertiv
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