2 Reasons to Like AWI and 1 to Stay Skeptical

June 13, 2025 at 00:01 AM EDT

AWI Cover Image

Armstrong World has been treading water for the past six months, holding steady at $154.10.

Is now the time to buy AWI? Or does the price properly account for its business quality and fundamentals? Find out in our full research report, it’s free.

Why Does AWI Stock Spark Debate?

Started as a two-man shop dating back to the 1860s, Armstrong (NYSE: AWI) provides ceiling and wall products to commercial and residential spaces.

Two Positive Attributes:

1. Long-Term Revenue Growth Shows Momentum

A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, Armstrong World’s sales grew at a decent 7.5% compounded annual growth rate over the last five years. Its growth was slightly above the average industrials company and shows its offerings resonate with customers. Armstrong World Quarterly Revenue

2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential

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.

Armstrong World has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 19.6% over the last five years.

Armstrong World Trailing 12-Month Free Cash Flow Margin

One Reason to be Careful:

Slow Organic Growth Suggests Waning Demand In Core Business

We can better understand Building Materials companies by analyzing their organic revenue. This metric gives visibility into Armstrong World’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, Armstrong World’s organic revenue averaged 4.1% year-on-year growth. This performance was underwhelming and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations. Armstrong World Organic Revenue Growth

Final Judgment

Armstrong World’s merits more than compensate for its flaws, but at $154.10 per share (or 21.5× forward P/E), is now the right time to buy the stock? See for yourself in our in-depth research report, it’s free.

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