Over the past six months, Carlisle’s stock price fell to $343.26. Shareholders have lost 14.9% of their capital, which is disappointing considering the S&P 500 has climbed by 7.6%. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Is there a buying opportunity in Carlisle, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Even though the stock has become cheaper, we're swiping left on Carlisle for now. Here are three reasons why we avoid CSL and a stock we'd rather own.
Why Is Carlisle Not Exciting?
Originally founded as Carlisle Tire and Rubber Company, Carlisle Companies (NYSE:CSL) is a multi-industry product manufacturer focusing on construction materials and weatherproofing technologies.
1. Core Business Falling Behind as Demand Declines
In addition to reported revenue, organic revenue is a useful data point for analyzing Building Materials companies. This metric gives visibility into Carlisle’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Carlisle’s organic revenue averaged 2.8% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Carlisle might have to lean into acquisitions to grow, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). 
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Carlisle’s revenue to rise by 4.6%. While this projection suggests its newer products and services will spur better top-line performance, it is still below average for the sector.
3. Recent EPS Growth Below Our Standards
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.
Carlisle’s EPS grew at an unimpressive 5.3% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 4.2% annualized revenue declines and tells us management adapted its cost structure in response to a challenging demand environment.
Final Judgment
Carlisle isn’t a terrible business, but it isn’t one of our picks. After the recent drawdown, the stock trades at 15× forward price-to-earnings (or $343.26 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We're fairly confident there are better stocks to buy right now. Let us point you toward a top digital advertising platform riding the creator economy.
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