Vertiv has been on fire lately. In the past six months alone, the company’s stock price has rocketed 59.7%, reaching $142.44 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is now still a good time to buy VRT? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.

Why Are We Positive On VRT?

Formerly part of Emerson Electric, Vertiv (NYSE: VRT) manufactures and services infrastructure technology products for data centers and communication networks.

1. Core Business Firing on All Cylinders

Investors interested in Electrical Systems companies should track organic revenue in addition to reported revenue. This metric gives visibility into Vertiv’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, Vertiv’s organic revenue averaged 19.6% year-on-year growth. This performance was fantastic and shows it can expand quickly without relying on expensive (and risky) acquisitions.

2. Increasing Free Cash Flow Margin Juices Financials

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, Vertiv’s margin expanded by 5.6 percentage points over the last five years. This is encouraging because it gives the company more optionality. Vertiv’s free cash flow margin for the trailing 12 months was 13.6%.

3. New Investments Bear Fruit as ROIC Jumps

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. Over the last few years, Vertiv’s ROIC has increased significantly. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.

Final Judgment

These are just a few reasons why we think Vertiv is an elite industrials company, and after the recent rally, the stock trades at 35.4× forward P/E (or $142.44 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.

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