Enpro currently trades at $284.75 and has been a dream stock for shareholders. It’s returned 227% since April 2021, more than tripling the S&P 500’s 65.1% gain. The company has also beaten the index over the past six months as its stock price is up 25.6% thanks to its solid quarterly results.
Is there a buying opportunity in Enpro, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Is Enpro Not Exciting?
We’re happy investors have made money, but we don't have much confidence in Enpro. Here are two reasons we avoid NPO and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Enpro grew its sales at a weak 1.3% compounded annual growth rate. This was below our standards.
2. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Enpro historically did a mediocre job investing in profitable growth initiatives. Its four-year average ROIC was 6.9%, somewhat low compared to the best industrials companies that consistently pump out 20%+.
Final Judgment
Enpro isn’t a terrible business, but it doesn’t pass our quality test. With its shares beating the market recently, the stock trades at 31.2× forward P/E (or $284.75 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 fairly confident there are better stocks to buy right now. We’d recommend looking at one of Charlie Munger’s all-time favorite businesses.
Stocks We Would Buy Instead of Enpro
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