In a sliding market, ESCO has defied the odds, trading up to $153.25 per share. Its 22.9% gain since October 2024 has outpaced the S&P 500’s 7.3% drop. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now still a good time to buy ESE? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Does ESCO Spark Debate?
A developer of the communication systems used in the Batmobile of “The Dark Knight,” ESCO (NYSE: ESE) is a provider of engineered components for the aerospace, defense, and utility sectors.
Two Positive Attributes:
1. Long-Term Revenue Growth Shows 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 many enduring ones grow for years. Thankfully, ESCO’s 7.5% annualized revenue growth over the last five years was decent. Its growth was slightly above the average industrials company and shows its offerings resonate with customers. 
2. EPS Moving Up Steadily
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
ESCO’s EPS grew at a decent 9.6% compounded annual growth rate over the last five years, higher than its 7.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
One Reason to be Careful:
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).
Although ESCO has shown solid business quality lately, it historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 8.1%, somewhat low compared to the best industrials companies that consistently pump out 20%+.
Final Judgment
ESCO has huge potential even though it has some open questions, and with its shares topping the market in recent months, the stock trades at 30.7× forward price-to-earnings (or $153.25 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More Than ESCO
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