VALMONT INDUSTRIES (NYSE:VMI) – A GARP Candidate Worth Considering

VALMONT INDUSTRIES (NYSE:VMI) emerged from our Peter Lynch-inspired screen as a potential fit for long-term investors seeking growth at a reasonable price. The company, which operates in infrastructure and agriculture markets, demonstrates a balance of steady growth, profitability, and financial health—key traits for a GARP (Growth at a Reasonable Price) strategy.

Why VMI Fits the Peter Lynch Criteria

• Earnings Growth: VMI has delivered a 5-year average EPS growth of 18.77%, aligning with Lynch’s preference for sustainable but not excessive growth (15-30% range).
• Valuation: While the PEG ratio (2.95) is above Lynch’s ideal threshold of 1, the company’s P/E (18.52) is below both the industry average (41.85) and the S&P 500 (24.85), suggesting relative value.
• Financial Health: A strong current ratio (2.26) and a manageable debt-to-equity ratio (0.45) indicate solid liquidity and conservative leverage.
• Profitability: A return on equity (ROE) of 21.27% exceeds Lynch’s 15% benchmark, reflecting efficient use of shareholder capital.

Fundamental Strengths

Our fundamental analysis report highlights VMI’s strengths:

• High Profitability: Margins (operating margin of 12.82%) rank above most peers.
• Stable Dividend: A 10-year track record of dividend growth, though the yield (0.88%) is modest.
• Improving Efficiency: Recent ROIC (13.63%) exceeds the 3-year average, signaling better capital allocation.

Considerations

• Slowing Growth: Revenue dipped slightly (-0.57%) last year, and future EPS growth is expected to moderate to ~9.8%.
• PEG Ratio: The elevated PEG suggests the market prices in past growth, which may not persist.

For investors comfortable with a cyclical industrial stock, VMI offers a mix of steady growth, profitability, and reasonable valuation.

Our Peter Lynch Strategy screener lists more 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.