Even though MSA Safety (currently trading at $168.96 per share) has gained 11.6% over the last six months, it has lagged the S&P 500’s 17.5% return during that period. This may have investors wondering how to approach the situation.

Is there a buying opportunity in MSA Safety, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Is MSA Safety Not Exciting?

We're swiping left on MSA Safety for now. Here are three reasons we avoid MSA and a stock we'd rather own.

1. Lackluster Revenue Growth

Long-term growth is the most important, but within business services, a stretched historical view may miss new innovations or demand cycles. MSA Safety’s recent performance shows its demand has slowed as its annualized revenue growth of 4.6% over the last two years was below its five-year trend.

2. Fewer Distribution Channels than Larger Competitors

With $1.83 billion in revenue over the past 12 months, MSA Safety is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.

3. 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.

MSA Safety’s EPS grew at an unimpressive 9.3% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 4.6% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

Final Judgment

MSA Safety isn’t a terrible business, but it doesn’t pass our quality test. With its shares trailing the market in recent months, the stock trades at 20.3× forward P/E (or $168.96 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at one of our all-time favorite software stocks.

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