RBC Bearings trades at $378.54 per share and has stayed right on track with the overall market, gaining 13.5% over the last six months. At the same time, the S&P 500 has returned 14.9%.
Is now a good time to buy RBC? Find out in our full research report, it’s free.
Why Does RBC Stock Spark Debate?
With a Guinness World Record for engineering the largest spherical plain bearing, RBC Bearings (NYSE:RBC) is a manufacturer of bearings and related components for the aerospace & defense, industrial, and transportation industries.
Two Positive Attributes:
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, RBC Bearings’s sales grew at an incredible 18.9% compounded annual growth rate over the last five years. Its growth surpassed the average industrials company and shows its offerings resonate with customers.
2. Operating Margin Reveals a Well-Run Organization
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
RBC Bearings has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 20.2%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
One Reason to be Careful:
Free Cash Flow Margin Dropping
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, RBC Bearings’s margin dropped by 8.4 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. RBC Bearings’s free cash flow margin for the trailing 12 months was 15.6%.
Final Judgment
RBC Bearings’s merits more than compensate for its flaws, but at $378.54 per share (or 31.9× forward P/E), is now the right time to buy the stock? See for yourself in our comprehensive research report, it’s free.
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