SIMPSON MANUFACTURING CO INC (NYSE:SSD) - A Strong Candidate for GARP Investors

SIMPSON MANUFACTURING CO INC (NYSE:SSD) emerged from our Peter Lynch-inspired screen as a stock with solid growth potential at a reasonable valuation. The company, which specializes in building and construction solutions, meets several key criteria for long-term investors seeking balanced growth and value.

Why SSD Fits the GARP Approach

• Sustainable Growth: SSD has delivered a 5-year average EPS growth of 20.59%, comfortably within Lynch’s preferred range of 15-30%. This indicates steady, manageable expansion rather than overheated growth.
• Attractive Valuation: With a PEG ratio of 0.996 (below Lynch’s threshold of 1), the stock appears reasonably priced relative to its earnings growth.
• Strong Profitability: The company’s return on equity (ROE) of 17.85% exceeds the 15% minimum Lynch favored, reflecting efficient use of shareholder capital.
• Healthy Balance Sheet: A debt-to-equity ratio of 0.20 and a current ratio of 3.21 suggest financial stability, with ample liquidity to cover short-term obligations.

Fundamental Highlights

Our fundamental analysis report assigns SSD a rating of 6 out of 10, noting its strong profitability and financial health. Key takeaways:

• Margins: SSD outperforms most peers with a gross margin of 45.96% and an operating margin of 19.50%.
• Efficiency: The company’s return on invested capital (ROIC) of 13.64% and 3-year average of 15.07% demonstrate effective capital allocation.
• Valuation: While the P/E ratio of 20.51 is slightly above industry averages, the PEG ratio suggests growth compensates for the premium.

For investors seeking similar opportunities, our Peter Lynch Strategy screener provides daily updates on stocks meeting these criteria.

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.