The Gorman-Rupp Company: Fair Value For A Pump-Centric Enterprise

The Gorman-Rupp Company: Fair Value For A Pump-Centric Enterprise

Summary

The Gorman-Rupp Company is a niche industrial products firm focused on the manufacture and sale of pumps.

The business has achieved mixed financial results in recent years, but performance for 2021 is looking up.

Even so, shares are likely in fair value territory and that means there are better prospects out there for investors to consider.

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imantsu/E+ via Getty Images In the industrial space, you will find all sorts of businesses with all sorts of areas of focus. One interesting example is a company called The Gorman-Rupp Company (NYSE: GRC ). With a very particular niche on the pump market, the business offers investors a unique opportunity to buy what could almost be considered a single product enterprise. Having said that, there are some downsides to the business. Although profits and cash flows have been consistent in recent years, the same can also be said of revenue. The company is exhibiting no real growth in the grand scheme of things and while shares are priced at might normally be considered attractive, they probably shouldn’t be when you consider the lack of upside the company has achieved in recent years. All things considered, Gorman-Rupp is not a bad company, but it is not a great one either. It probably is more or less fairly valued, meaning that there are likely better opportunities on the market to be had at this time. A play on pumps

Gorman-Rupp is a company incorporated in Ohio that is singularly focused on the manufacture and sale of pumps and pump systems . For more context, these products are used in water, wastewater, construction, dewatering, industrial, petroleum, agriculture, fire protection, and other miscellaneous areas and activities. For the most part, the firm’s pump models range in size from one-quarter of an inch to as large as almost 15 feet and they range in capacity from less than one gallon per minute to around one million gallons per minute. The pumps the company makes include self-priming pumps, centrifugal pumps, magnetic drive centrifugal pumps, axial pumps, and so much more. In short, it appears as though there isn’t a pump the company cannot produce.

Geographically, Gorman-Rupp is focused largely on selling its pumps and pump systems to customers in the US. In 2020, 70.8% of its revenue came from here at home. The rest of revenue, meanwhile, was attributable to a number of countries in which it operates. The company services its global client base through locations in six different US states, as well as in Canada, Ireland, The Netherlands, South Africa, and Belgium. On top of this, the company leases a warehouse facility in Dubai. Author – SEC EDGAR Data When I look at a company, I tend to prefer firms that can exhibit consistent growth on both their top and bottom lines. But that is not what we see when looking at this firm. Revenue grew from $382.07 million in 2016 to $414.33 million in 2018. But then, in 2019, sales dropped to $398.18 million before dropping further to $348.97 million in 2020. Fortunately for investors, this decline seems to have been short-lived. I say this because, in the first nine months of its 2021 fiscal year , the company generated sales of $284.15 million. That represents an increase of 6.6% over the $266.47 million the company generated one year earlier. Author – SEC EDGAR Data Just as revenue has remained in a fairly narrow range, so too has profitability. Between 2016 and 2019, sales bumped around between $24.88 million and $39.98 million. In 2020, profits came in at just $25.19 million. Operating cash flow has followed a similar trajectory, ranging from a low over the past five years of $41.21 million to a high of $62.17 million. 2020 saw operating cash flow come in at $51.16 million. Another metric to pay attention to is EBITDA. This has also moved around in a narrow range, with a low point of $41.45 million and a high point of $67.71 million. 2020 is reading was $53.98 million. Heading into the 2021 fiscal year, things did improve some. But there is no evidence that we are moving outside of the company’s historical range. Net income, for instance, came in at $23.31 million in the first nine months of 2021. That is slightly higher than the $18.38 million generated in the first nine months […]

source The Gorman-Rupp Company: Fair Value For A Pump-Centric Enterprise

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