AMPHENOL CORP-CL A (NYSE:APH) – A Quality Stock with Strong Fundamentals

AMPHENOL CORP-CL A (NYSE:APH) was identified by our Caviar Cruise screen as a potential candidate for quality investors. The company demonstrates strong revenue and profit growth, high returns on capital, and solid financial health—key traits sought by long-term investors. Below, we examine why APH fits the criteria for a quality investment.

Key Strengths of AMPHENOL

• Revenue and EBIT Growth – APH has delivered a 5-year revenue CAGR of 10.2%, while EBIT growth has been even stronger at 14.8%, indicating improving profitability.
• High Return on Invested Capital (ROIC) – With an ROIC (excluding cash and goodwill) of 54.8%, the company efficiently generates profits from its capital investments.
• Strong Free Cash Flow Conversion – APH’s 5-year average profit quality (FCF/Net Income) stands at 95.6%, reflecting reliable cash generation.
• Manageable Debt – The debt-to-free cash flow ratio of 3.2 suggests the company can repay its obligations in just over three years.

Fundamental Analysis Summary

Our report assigns APH a fundamental rating of 6/10, highlighting its strengths in profitability and growth, though valuation appears stretched. Key takeaways:

• Profitability (9/10) – High margins (Operating Margin: 21.9%, ROIC: 16.1%) place APH among the top performers in its industry.
• Growth (7/10) – Revenue and earnings have grown at double-digit rates, with analysts forecasting continued expansion.
• Financial Health (4/10) – While debt levels are reasonable, liquidity metrics are slightly below industry averages.
• Valuation (3/10) – The stock trades at a premium (P/E: 42.6), which may limit near-term upside.

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Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should conduct your own analysis before making investment decisions.