Howmet currently trades at $248.39 and has been a dream stock for shareholders. It’s returned 663% since April 2021, blowing past the S&P 500’s 68.6% gain. The company has also beaten the index over the past six months as its stock price is up 31% thanks to its solid quarterly results.
Following the strength, is HWM a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.
Why Is Howmet a Good Business?
Inventing the first forged aluminum truck wheel, Howmet (NYSE: HWM) specializes in lightweight metals engineering and manufacturing multi-material components used in vehicles.
1. Long-Term Revenue Growth Shows Strong Momentum
Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, Howmet’s 9.4% annualized revenue growth over the last five years was solid. Its growth beat the average industrials company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Howmet’s EPS grew at 30.9% compounded annual growth rate over the last five years, higher than its 9.4% 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
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Howmet’s margin expanded by 12.3 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. Howmet’s free cash flow margin for the trailing 12 months was 17.3%.
Final Judgment
These are just a few reasons why Howmet is one of the best industrials companies out there, and with its shares outperforming the market lately, the stock trades at 54× forward P/E (or $248.39 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More Than Howmet
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