Over the last six months, Trane Technologies shares have sunk to $329.16, producing a disappointing 17.9% loss - worse than the S&P 500’s 10.7% drop. This may have investors wondering how to approach the situation.
Following the pullback, is now the time to buy TT? Find out in our full research report, it’s free.
Why Is TT a Good Business?
With low-pressure heating systems as the first product, Trane (NYSE: TT) designs, manufactures, and sells HVAC and refrigeration systems, the former to commercial and residential building customers and the latter to commercial truck manufacturers.
1. Long-Term Revenue Growth Shows Momentum
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, Trane Technologies’s sales grew at a decent 8.7% compounded annual growth rate over the last five years. Its growth was slightly above the average industrials company and shows its offerings resonate with customers. 
2. Operating Margin Rising, Profits Up
Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.
Analyzing the trend in its profitability, Trane Technologies’s operating margin rose by 5.3 percentage points over the last five years, as its sales growth gave it immense operating leverage. Its operating margin for the trailing 12 months was 17.6%.
3. 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.
Trane Technologies’s EPS grew at a remarkable 13.3% compounded annual growth rate over the last five years, higher than its 8.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
These are just a few reasons why we're bullish on Trane Technologies. With the recent decline, the stock trades at 26.2× forward price-to-earnings (or $329.16 per share). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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