Today we're going to take a closer look at Large-Cap Industrials company Westinghouse, whose shares are currently trading at $164.95. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
Forward Earnings Show Improvement but Priced Beyond Its Margin of Safety:
Westinghouse Air Brake Technologies Corporation, together with its subsidiaries, provides technology-based locomotives, equipment, systems, and services for the freight rail and passenger transit industries worldwide. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 25.19 and an average price to book (P/B) ratio of 3.17. In contrast, Westinghouse has a trailing 12 month P/E ratio of 28.9 and a P/B ratio of 2.76.
Westinghouse's PEG ratio is 1.59, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Growing Revenues but an Average Current Ratio:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $4,364 | $8,200 | $7,556 | $7,822 | $8,362 | $9,677 |
| Gross Margins | 28% | 28% | 28% | 30% | 30% | 30% |
| Net Margins | 7% | 4% | 5% | 7% | 8% | 8% |
| Net Income (M) | $295 | $327 | $414 | $558 | $633 | $815 |
| Net Interest Expense (M) | -$112 | -$219 | -$199 | -$177 | -$186 | -$218 |
| Depreciation & Amort. (M) | $109 | $401 | $473 | $491 | $479 | $531 |
| Diluted Shares (M) | 193 | 177 | 190 | 188 | 183 | 180 |
| Earnings Per Share | $1.53 | $1.84 | $2.17 | $2.97 | $3.46 | $4.54 |
| EPS Growth | n/a | 20.26% | 17.93% | 36.87% | 16.5% | 31.21% |
| Avg. Price | $89.37 | $70.22 | $63.26 | $83.21 | $89.83 | $164.51 |
| P/E Ratio | 58.41 | 41.55 | 29.29 | 28.21 | 26.27 | 36.4 |
| Free Cash Flow (M) | $221 | $830 | $648 | $943 | $889 | $1,015 |
| CAPEX (M) | $93 | $186 | $136 | $130 | $149 | $186 |
| EV / EBITDA | 35.1 | 16.26 | 13.31 | 14.12 | 13.66 | 18.86 |
| Total Debt (M) | $3,857 | $4,334 | $4,686 | $4,060 | $4,253 | $4,850 |
| Net Debt / EBITDA | 5.62 | 3.51 | 3.36 | 2.62 | 2.49 | 2.35 |
| Current Ratio | 2.7 | 1.29 | 1.2 | 1.32 | 1.25 | 1.2 |
Westinghouse has growing revenues and increasing reinvestment in the business and generally positive cash flows. Additionally, the company's financial statements display a strong EPS growth trend and healthy leverage levels. Furthermore, Westinghouse has similar gross margins to its peers and just enough current assets to cover current liabilities, as shown by its current ratio of 1.2.
