Hubbell trades at $451.35 per share and has stayed right on track with the overall market, gaining 10.5% over the last six months. At the same time, the S&P 500 has returned 11.7%.
Is HUBB a buy right now? Find out in our full research report, it’s free for active Edge members.
Why Are We Positive On HUBB?
A respected player in the electrical segment, Hubbell (NYSE: HUBB) manufactures electronic products for the construction, industrial, utility, and telecommunications markets.
1. Operating Margin Rising, Profits Up
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Analyzing the trend in its profitability, Hubbell’s operating margin rose by 7.6 percentage points over the last five years, as its sales growth gave it immense operating leverage. Its operating margin for the trailing 12 months was 20.3%.
2. 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.
Hubbell’s EPS grew at an astounding 18.1% compounded annual growth rate over the last five years, higher than its 8% 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
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, Hubbell’s margin expanded by 6.4 percentage points over the last five years. This is encouraging because it gives the company more optionality. Hubbell’s free cash flow margin for the trailing 12 months was 15%.
Final Judgment
These are just a few reasons why we think Hubbell is a high-quality business, but at $451.35 per share (or 23.3× forward P/E), is now the time to initiate a position? See for yourself in our in-depth research report, it’s free for active Edge members.
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