Griffon has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 7% to $82.50 per share while the index has gained 5.4%.
Is now the time to buy GFF? Find out in our full research report, it’s free.
Why Does GFF Stock Spark Debate?
Initially in the defense industry, Griffon (NYSE: GFF) is a now diversified company specializing in home improvement, professional equipment, and building products.
Two Positive Attributes:
1. 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.
Griffon’s EPS grew at an astounding 32.6% compounded annual growth rate over the last five years, higher than its 2.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
2. 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, Griffon’s margin expanded by 10 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. Griffon’s free cash flow margin for the trailing 12 months was 12%.
One Reason to be Careful:
Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Griffon grew its sales at a sluggish 2.4% compounded annual growth rate. This wasn’t a great result, but there are still things to like about Griffon.
Final Judgment
Griffon has huge potential even though it has some open questions, but at $82.50 per share (or 13.8× forward P/E), is now the right time to buy the stock? See for yourself in our full research report, it’s free.
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