SIMPSON MANUFACTURING CO INC (NYSE:SSD) Shows Strong Financial Health and Growth, Aligning with Peter Lynch's GARP Strategy

Investors looking for long-term growth chances at fair prices frequently use established methods like the one made famous by Peter Lynch. The former Fidelity Magellan Fund manager had outstanding results by concentrating on companies with lasting earnings growth, good financial condition, and fair prices. His method focuses on fundamental review instead of predicting market movements, looking for businesses that show steady profit without high debt. This system fits well with Growth at a Reasonable Price (GARP) investing, which mixes growth possibility with price control.

Financial Health and Stability

Simpson Manufacturing Co Inc (NYSE:SSD) shows a number of traits that Lynch liked in long-term investments. The company keeps a careful capital structure with a debt-to-equity ratio of 0.18, much lower than Lynch's chosen limit of 0.25. This small amount of debt offers financial room and lowers risk in poor economic times. The company's current ratio of 3.37 points to good short-term cash availability, greatly passing Lynch's lowest need of 1.0. This solid financial situation makes sure the company can handle its responsibilities while paying for future growth projects.

Key financial condition measures include:

• Debt-to-Equity Ratio: 0.18 (much lower than industry average)
• Current Ratio: 3.37 (showing good cash availability)
• Altman-Z Score: 6.52 (pointing to low bankruptcy risk)

Profitability and Growth Measures

The company's profitability picture fits well with Lynch's standards for lasting growth. Simpson Manufacturing has reached a five-year EPS growth rate of 20.59%, easily inside Lynch's goal span of 15-30%. This growth rate shows the company's skill to increase earnings without getting to unstable levels. The return on equity of 17.12% passes Lynch's 15% lowest need, showing good use of shareholder money. These measures indicate the company has kept quality growth while creating strong returns for investors.

Profitability points:

• 5-Year EPS Growth: 20.59%
• Return on Equity: 17.12%
• Operating Margin: 19.62% (doing better than 80% of industry peers)

Valuation Review

From a price point of view, Simpson Manufacturing shows an interesting case for GARP investors. The company's PEG ratio of 0.997 falls inside Lynch's chosen span of below 1.0, suggesting the stock may be fairly valued compared to its growth path. While the P/E ratio of 20.53 looks somewhat high next to industry averages, the PEG ratio including growth points to possible worth. Lynch stressed that price measures must be looked at together with growth rates and financial strength, making the PEG ratio especially useful for review.

Valuation points:

• PEG Ratio: 0.997 (meets Lynch's standards)
• P/E Ratio: 20.53 (a bit higher than industry average)
• Price/Forward Earnings: 18.71

Fundamental Review Summary

The full fundamental review of Simpson Manufacturing shows a company with good operational traits. The company gets an overall fundamental score of 6 out of 10, with especially good scores in profitability (8/10) and financial condition (8/10). The review points to very good margins, with gross margin of 46.13% doing better than 97.56% of industry peers. While growth measures show some slowing from past levels, the company keeps positive earnings and revenue growth forecasts. The complete fundamental analysis report gives more details on these traits.

Industry Standing and Business System

Simpson Manufacturing works in the building products field, making connectors, fastening systems, and construction solutions. This business matches Lynch's liking for understandable companies in necessary industries. The company's products serve basic construction needs, giving stability across economic cycles. Their focus on both wood and concrete construction uses creates variety within their main market. This operational picture fits Lynch's idea of investing in businesses with clear, lasting demand sources instead of following uncertain trends.

For investors wanting to find more companies that meet Peter Lynch's investment standards, the Peter Lynch Strategy screener gives often updated screening results based on these settings.

Disclaimer: This review is for information only and does not make up investment guidance. Investors should do their own study and talk with financial advisors before making investment choices. Past results do not promise future outcomes, and all investments have risk including possible loss of original money.