What a brutal six months it’s been for Core & Main. The stock has dropped 20.9% and now trades at $43.67, rattling many shareholders. This might have investors contemplating their next move.
Following the pullback, is now an opportune time to buy CNM? Find out in our full research report, it’s free.
Why Does CNM Stock Spark Debate?
Formerly a division of industrial distributor HD Supply, Core & Main (NYSE: CNM) is a provider of water, wastewater, and fire protection products and services.
Two Things to Like:
1. Skyrocketing Revenue Shows Strong Momentum
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Core & Main grew its sales at an exceptional 14.7% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers.
2. 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, Core & Main’s margin expanded by 8.9 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 while its operating profitability was flat. Core & Main’s free cash flow margin for the trailing 12 months was 8%.
One Reason to Be Careful:
New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
Over the last few years, Core & Main’s ROIC averaged 4 percentage point decreases each year. Only time will tell if its new bets can bear fruit and potentially reverse the trend.
Final Judgment
Core & Main has huge potential even though it has some open questions. With the recent decline, the stock trades at 14.5× forward P/E (or $43.67 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.
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