Over the last six months, Belden’s shares have sunk to $114.97, producing a disappointing 9.9% loss - a stark contrast to the S&P 500’s 10% gain. This might have investors contemplating their next move.
Is now the time to buy Belden, 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.
Why Is Belden Not Exciting?
Even with the cheaper entry price, we don't have much confidence in Belden. Here are three reasons you should be careful with BDC and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, Belden’s sales grew at a mediocre 6.8% compounded annual growth rate over the last five years. This was below our standard for the industrials sector.
2. Recent EPS Growth Below Our Standards
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Belden’s weak 1.8% annual EPS growth over the last two years aligns with its revenue trend. This tells us it maintained its per-share profitability as it expanded.
3. New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. On average, Belden’s ROIC decreased by 3.3 percentage points annually over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
Belden’s business quality ultimately falls short of our standards. After the recent drawdown, the stock trades at 15.2× forward P/E (or $114.97 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are more exciting stocks to buy at the moment. Let us point you toward a dominant Aerospace business that has perfected its M&A strategy.
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