Although the S&P 500 is down 6.2% over the past six months, Carlisle’s stock price has fallen further to $385.47, losing shareholders 14.1% of their capital. This might have investors contemplating their next move.
Is there a buying opportunity in Carlisle, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Carlisle Not Exciting?
Despite the more favorable entry price, we don't have much confidence in Carlisle. Here are three reasons why there are better opportunities than CSL and a stock we'd rather own.
1. Long-Term Revenue Growth Flatter Than a Pancake
Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Carlisle struggled to consistently increase demand as its $5.00 billion of sales for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and signals it’s a lower quality business. 
2. Core Business Falling Behind as Demand Plateaus
Investors interested in Building Materials companies should track organic revenue in addition to reported revenue. This metric gives visibility into Carlisle’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Carlisle failed to grow its organic revenue. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Carlisle might have to lean into acquisitions to accelerate growth, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). 
3. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Carlisle’s revenue to rise by 5.5%. While this projection indicates its newer products and services will fuel better top-line performance, it is still below average for the sector.
Final Judgment
Carlisle isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 17× forward P/E (or $385.47 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.
Stocks We Like More Than Carlisle
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