Enpro currently trades at $172.52 and has been a dream stock for shareholders. It’s returned 426% since March 2020, nearly tripling the S&P 500’s 152% gain. The company has also beaten the index over the past six months as its stock price is up 8.8% thanks to its solid quarterly results.
Is now the time to buy Enpro, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
We’re happy investors have made money, but we're sitting this one out for now. Here are three reasons why there are better opportunities than NPO and a stock we'd rather own.
Why Is Enpro Not Exciting?
Holding a Guinness World Record for creating the world's largest gasket, Enpro (NYSE:NPO) designs, manufactures, and sells products used for machinery in various industries.
1. Revenue Spiraling Downwards
A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Enpro’s demand was weak and its revenue declined by 2.8% per year. This wasn’t a great result and signals it’s a lower quality business. 
2. EPS Took a Dip Over the Last Two Years
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Sadly for Enpro, its EPS declined by more than its revenue over the last two years, dropping 3.9%. This tells us the company struggled to adjust to shrinking demand.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Enpro historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.3%, somewhat low compared to the best industrials companies that consistently pump out 20%+.
Final Judgment
Enpro isn’t a terrible business, but it isn’t one of our picks. With its shares outperforming the market lately, the stock trades at 22.7× forward price-to-earnings (or $172.52 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - you can find better investment opportunities elsewhere. We’d suggest looking at one of our top software and edge computing picks.
Stocks We Like More Than Enpro
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