Vertiv Holdings Co-A (NYSE:VRT): A Strong Affordable Growth Pick with Solid Fundamentals

Investors looking for growth opportunities at fair prices often consider the "Affordable Growth" strategy. This method focuses on companies with solid growth potential, good profitability, and strong financials, all while trading at reasonable valuations. It avoids paying too much for high-growth stocks, balancing potential gains with stability. One company that meets these standards is Vertiv Holdings Co-A (NYSE:VRT), a leader in digital infrastructure technology for data centers and communication networks.

Growth: Consistent and Promising Expansion

Vertiv’s growth performance is notable, scoring 8 out of 10 in ChartMill’s Growth rating. Key points include:

• Earnings Per Share (EPS) Growth: EPS increased by 53.21% over the past year, with a five-year annual growth rate of 55.36%.
• Revenue Growth: Sales grew by 26.31% in the last year, with a five-year average growth of 12.57%.
• Future Expectations: Analysts predict EPS will grow 19.13% annually, with revenue expected to rise 13.30% per year.

These figures show Vertiv’s strong past performance and its potential for continued growth, making it a good fit for an affordable growth strategy.

Valuation: Fair Compared to Peers

Vertiv’s valuation score of 5 suggests a mixed outlook, but several factors support its inclusion:

• P/E Ratio: The trailing P/E of 41.54 is high but lower than 69.89% of its peers in the Electrical Equipment industry.
• Forward P/E: At 31.59, the forward P/E is more reasonable, below the S&P 500 average (36.28) and cheaper than 68.82% of competitors.
• Enterprise Value/EBITDA & Price/FCF: Vertiv trades at a discount to peers on these measures, highlighting its relative affordability.

The PEG ratio, which factors in growth, suggests the stock is fairly priced, especially given its strong profitability and growth path.

Profitability and Financial Health: Solid Performance

Vertiv’s profitability score of 9 reflects its efficient returns:

• Margins: Operating margin (17.41%) and gross margin (35.29%) rank among the best in its industry.
• Return Metrics: ROE (25.99%) and ROIC (17.60%) exceed industry averages, showing effective use of capital.

Financial health (score: 8) is also strong:

• Solvency: An Altman-Z score of 6.07 indicates low bankruptcy risk, while a debt-to-FCF ratio of 2.35 suggests manageable obligations.
• Liquidity: Current and quick ratios are average, but strong cash flow eases concerns.

Why These Factors Are Important

The Affordable Growth strategy favors companies like Vertiv because:

1. Growth supports future earnings.
2. Valuation avoids overpaying, protecting against downside risk.
3. Profitability and Health ensure long-term stability.

Vertiv’s mix of growth, fair valuation, and financial strength makes it an attractive option for investors seeking balanced growth exposure. For more details, see the full fundamental analysis report here.

Find More Affordable Growth Stocks

Vertiv is one example from our Affordable Growth screen. To see other stocks that fit these criteria, click here for the full screener results.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research or consult a financial advisor before making decisions.