Gibraltar has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 6.4% to $63.71 per share while the index has gained 7.1%.

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

Why Is Gibraltar Not Exciting?

We're swiping left on Gibraltar for now. Here are three reasons why there are better opportunities than ROCK and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last four years, Gibraltar grew its sales at a sluggish 4.3% compounded annual growth rate. This was below our standard for the industrials sector.

2. 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.

Gibraltar 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 25.2% gross margin over the last five years. That means Gibraltar paid its suppliers a lot of money ($74.76 for every $100 in revenue) to run its business.

3. Free Cash Flow Margin Dropping

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.

As you can see below, Gibraltar’s margin dropped by 2 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. Gibraltar’s free cash flow margin for the trailing 12 months was 8.3%.

Final Judgment

Gibraltar isn’t a terrible business, but it doesn’t pass our bar. That said, the stock currently trades at 13.2× forward P/E (or $63.71 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment. Let us point you toward the most entrenched endpoint security platform on the market.

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