Insteel (IIIN): Buy, Sell, or Hold Post Q2 Earnings?

September 30, 2025 at 00:04 AM EDT

IIIN Cover Image

What a fantastic six months it’s been for Insteel. Shares of the company have skyrocketed 45.3%, hitting $38.22. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is now the time to buy Insteel, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Why Is Insteel Not Exciting?

We’re happy investors have made money, but we're swiping left on Insteel for now. Here are three reasons you should be careful with IIIN and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Insteel’s sales grew at a mediocre 6.2% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector.

2. EPS Took a Dip Over the Last Two Years

Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.

Sadly for Insteel, its EPS declined by more than its revenue over the last two years, dropping 19.5%. This tells us the company struggled to adjust to shrinking demand.

Insteel Trailing 12-Month EPS (Non-GAAP)

3. New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Insteel’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Insteel Trailing 12-Month Return On Invested Capital

Final Judgment

Insteel isn’t a terrible business, but it doesn’t pass our bar. After the recent rally, the stock trades at 14.6× forward P/E (or $38.22 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.

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