Over the past six months, Trane Technologies’s stock price fell to $411.50. Shareholders have lost 5.7% of their capital, which is disappointing considering the S&P 500 has climbed by 10.4%. This may have investors wondering how to approach the situation.
Given the weaker price action, is now an opportune time to buy TT? Find out in our full research report, it’s free for active Edge members.
Why Is Trane Technologies a Good Business?
With low-pressure heating systems as its first product, Trane (NYSE: TT) designs, manufactures, and sells HVAC and refrigeration systems, the former to commercial and residential building customers and the latter to commercial truck manufacturers.
1. Skyrocketing Revenue Shows Strong Momentum
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Trane Technologies’s sales grew at an impressive 11.1% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Trane Technologies’s EPS grew at an astounding 21.6% compounded annual growth rate over the last five years, higher than its 11.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Stellar ROIC Showcases Lucrative Growth Opportunities
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).
Trane Technologies’s five-year average ROIC was 24.3%, placing it among the best industrials companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.
Final Judgment
These are just a few reasons Trane Technologies is a rock-solid business worth owning. With the recent decline, the stock trades at 27.8× forward P/E (or $411.50 per share). Is now a good time to initiate a position? See for yourself in our in-depth research report, it’s free for active Edge members.
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