AZZ currently trades at $89.93 per share and has shown little upside over the past six months, posting a small loss of 3.4%.

Is now the time to buy AZZ? Or does the price properly account for its business quality and fundamentals? 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. Long-Term Revenue Growth Shows Momentum

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, AZZ’s 8.2% 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. 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 a remarkable 13.9% compounded annual growth rate over the last five years, higher than its 8.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

One Reason to be Careful:

Low Gross Margin Reveals Weak Structural Profitability

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

AZZ has bad unit economics for an industrials company, giving it less room to reinvest and develop new offerings. As you can see below, it averaged a 23.7% gross margin over the last five years. That means AZZ paid its suppliers a lot of money ($76.27 for every $100 in revenue) to run its business.

Final Judgment

AZZ’s merits more than compensate for its flaws, but at $89.93 per share (or 15.4× 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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