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Enpro (NPO): Buy, Sell, or Hold Post Q3 Earnings?

NPO Cover Image

Enpro trades at $214.18 and has moved in lockstep with the market. Its shares have returned 9.7% over the last six months while the S&P 500 has gained 11.2%.

Is there a buying opportunity in Enpro, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.

Why Is Enpro Not Exciting?

We're cautious about Enpro. Here are three reasons you should be careful with NPO and a stock we'd rather own.

1. Long-Term Revenue Growth Flatter Than a Pancake

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Enpro struggled to consistently increase demand as its $1.11 billion of sales for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and signals it’s a lower quality business.

Enpro Quarterly Revenue

2. Recent EPS Growth Below Our Standards

Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.

Enpro’s EPS grew at an unimpressive 4.7% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 1.1% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

Enpro Trailing 12-Month EPS (Non-GAAP)

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? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Enpro historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.5%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

Enpro Trailing 12-Month Return On Invested Capital

Final Judgment

Enpro isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 25.8× forward P/E (or $214.18 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're fairly confident there are better stocks to buy right now. We’d suggest looking at the most entrenched endpoint security platform on the market.

Stocks We Would Buy Instead of Enpro

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