Have you been paying attention to shares of Zurn Water (ZWS)? Shares have been on the move with the stock up 7.8% over the past month. The stock hit a new 52-week high of $34.94 in the previous session. Zurn Water has gained 15.7% since the start of the year compared to the 9.7% move for the Zacks Industrial Products sector and the 11.2% return for the Zacks Manufacturing – Electronics industry.
What’s Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn’t missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 30, 2024, Zurn Water reported EPS of $0.33 versus consensus estimate of $0.32.
For the current fiscal year, Zurn Water is expected to post earnings of $1.21 per share on $1.56 billion in revenues. This represents a 24.74% change in EPS on a 1.82% change in revenues. For the next fiscal year, the company is expected to earn $1.33 per share on $1.62 billion in revenues. This represents a year-over-year change of 9.67% and 4.04%, respectively.
Valuation Metrics
Zurn Water may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Zurn Water has a Value Score of C. The stock’s Growth and Momentum Scores are A and C, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 28.1X current fiscal year EPS estimates, which is a premium to the peer industry average of 22.2X. On a trailing cash flow basis, the stock currently trades at 22.6X versus its peer group’s average of 21.8X. Additionally, the stock has a PEG ratio of 1.83. This isn’t enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to consider the stock’s Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Zurn Water currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Zurn Water meets the list of requirements. Thus, it seems as though Zurn Water shares could still be poised for more gains ahead.
How Does ZWS Stack Up to the Competition?
Shares of ZWS have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Eaton Corporation, PLC (ETN). ETN has a Zacks Rank of # 2 (Buy) and a Value Score of C, a Growth Score of C, and a Momentum Score of A.
Earnings were strong last quarter. Eaton Corporation, PLC beat our consensus estimate by 4.60%, and for the current fiscal year, ETN is expected to post earnings of $10.74 per share on revenue of $25.14 billion.
Shares of Eaton Corporation, PLC have gained 5% over the past month, and currently trade at a forward P/E of 29.29X and a P/CF of 27.41X.
The Manufacturing – Electronics industry is in the top 10% of all the industries we have in our universe, so it looks like there are some nice tailwinds for ZWS and ETN, even beyond their own solid fundamental situation.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Zurn Elkay Water Solutions Cor (ZWS) : Free Stock Analysis Report
Eaton Corporation, PLC (ETN) : Free Stock Analysis Report