Since August 2020, the S&P 500 has delivered a total return of 84.4%. But one standout stock has more than doubled the market - over the past five years, AZZ has surged 232% to $116.44 per share. Its momentum hasn’t stopped as it’s also gained 21.2% in the last six months thanks to its solid quarterly results, beating the S&P by 12.3%.
Following the strength, is AZZ a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.
Why Does AZZ Spark Debate?
Responsible for projects like nuclear facilities, AZZ (NYSE: AZZ) is a provider of metal coating and power infrastructure solutions.
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.
AZZ’s EPS grew at an astounding 21.2% compounded annual growth rate over the last five years, higher than its 10% 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, AZZ’s margin expanded by 13.5 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. AZZ’s free cash flow margin for the trailing 12 months was 24.2%.
One Reason to be Careful:
Lackluster Revenue Growth
We at StockStory place the most emphasis on long-term growth, but within industrials, a stretched historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. AZZ’s recent performance shows its demand has slowed as its annualized revenue growth of 2.6% over the last two years was below its five-year trend. 
Final Judgment
AZZ’s merits more than compensate for its flaws, and with its shares topping the market in recent months, the stock trades at 19.2× forward P/E (or $116.44 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.
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