Over the past six months, APi’s shares (currently trading at $39.85) have posted a disappointing 10.2% loss, well below the S&P 500’s 9.7% gain. This might have investors contemplating their next move.
Given the weaker price action, is this a buying opportunity for APG? Find out in our full research report, it’s free.
Why Is APi a Good Business?
Started in 1926 as an insulation contractor, APi (NYSE: APG) provides life safety solutions and specialty services for buildings and infrastructure.
1. Skyrocketing Revenue Shows Strong Momentum
Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, APi’s 18.5% annualized revenue growth over the last five years was incredible. Its growth surpassed 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.
APi’s EPS grew at a spectacular 15.8% compounded annual growth rate over the last five years. This performance was better than most industrials businesses.
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, APi’s margin expanded by 7.2 percentage points over the last five years. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. APi’s free cash flow margin for the trailing 12 months was 8%.
Final Judgment
These are just a few reasons why we think APi is a great business. After the recent drawdown, the stock trades at 21.6× forward P/E (or $39.85 per share). Is now a good time to initiate a position? See for yourself in our full research report, it’s free.
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