Vertiv currently trades at $191.25 and has been a dream stock for shareholders. It’s returned 852% since February 2021, blowing past the S&P 500’s 81.2% gain. The company has also beaten the index over the past six months as its stock price is up 36.4% thanks to its solid quarterly results.
Is now still a good time to buy VRT? 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 VRT a Good Business?
Formerly part of Emerson Electric, Vertiv (NYSE: VRT) manufactures and services infrastructure technology products for data centers and communication networks.
1. Core Business Firing on All Cylinders
Investors interested in Electrical Systems companies should track organic revenue in addition to reported revenue. This metric gives visibility into Vertiv’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, Vertiv’s organic revenue averaged 21% year-on-year growth. This performance was fantastic and shows it can expand quickly without relying on expensive (and risky) acquisitions. 
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, Vertiv’s margin expanded by 7.9 percentage points over the last five years. This is encouraging because it gives the company more optionality. Vertiv’s free cash flow margin for the trailing 12 months was 14.1%.
3. New Investments Bear Fruit as ROIC Jumps
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Vertiv’s ROIC has increased significantly over the last few years. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.
Final Judgment
These are just a few reasons why Vertiv ranks near the top of our list, and with its shares outperforming the market lately, the stock trades at 36.7× forward P/E (or $191.25 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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