Over the past six months, Core & Main has been a great trade. While the S&P 500 was flat, the stock price has climbed by 19.3% to $52.53 per share. This performance may have investors wondering how to approach the situation.
Is now still a good time to buy CNM? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.
Why Is CNM a Good Business?
Formerly a division of industrial distributor HD Supply, Core & Main (NYSE: CNM) is a provider of water, wastewater, and fire protection products and services.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, Core & Main’s 17% 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. Operating Margin Rising, Profits Up
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Analyzing the trend in its profitability, Core & Main’s operating margin rose by 4.7 percentage points over the last five years, as its sales growth gave it operating leverage. Its operating margin for the trailing 12 months was 9.7%.
3. 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.
Core & Main’s EPS grew at an astounding 60.2% compounded annual growth rate over the last five years, higher than its 17% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
These are just a few reasons why we're bullish on Core & Main, and with its shares outperforming the market lately, the stock trades at 21.6× forward P/E (or $52.53 per share). Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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