The industrial manufacturing sector is riding a steady growth wave driven by technological breakthroughs resulting in reduced operating costs and increased efficiency. In this favorable environment, The Gorman-Rupp Company (GRC) is well-positioned to leverage the sector’s growing prospects.

The industrial sector continuously evolves, adapting to the latest technological advancements that reshape its operations. Today, innovations such as cloud computing, machine learning, the Internet of Things, and artificial intelligence have become deeply embedded in manufacturing, fostering greater efficiency, flexibility, and cost-effectiveness.

This rapid transformation, known as Industry 4.0 or the Fourth Industrial Revolution, has driven higher productivity, reduced operating costs, and increased profitability for businesses. Within this landscape, GRC stands out as a premier industrial stock, specializing in the production of pumps and pump systems across various industries.

Reflecting its strong market position and growth potential, GRC’s stock has climbed 15.3% over the past nine months, closing its latest trading session at $37.80.

Now, let us discuss the factors that could affect the stock’s growth trajectory.

Stable Historical Growth

GRC’s performance is evident in its steady growth across key metrics. Over the past three years, revenue and EBITDA have grown at a CAGR of 21.5% and 31.8%, respectively, while operating income and total assets have expanded at 31.3% and 27.9%.

Furthermore, net income and EPS have increased at a CAGR of 8.2% and 8%, underscoring the company’s sustained profitability and expansion.

Sound Financials

For the fiscal 2024 third quarter that ended September 30, 2024, GRC’s net sales marginally increased year-over-year to $168.18 million. Its operating income rose 9.2% from the year-ago value to $23.89 million.

Furthermore, the company’s non-GAAP adjusted earnings and non-GAAP adjusted EPS grew 43.9% and 44.1% from the prior year’s quarter to $12.92 million and $0.49, respectively. As of September 30, 2024, GRC’s cash and cash equivalents amounted to $39.70 million, compared to $30.52 million on December 31, 2023.

Dividend Growth

On January 17, GRC declared a quarterly cash dividend of $0.185 per share, payable on March 10, 2025, to shareholders of record as of the close of business on February 14, 2025. The commitment to returning value may appeal to long-term investors, potentially driving stock demand.

GRC has increased its dividends for 11 consecutive years. Currently, it pays an annual dividend of $0.74, which translates to a 1.95% yield at the current price level. The stock’s dividend payouts have increased at a CAGR of 5.7% over the past five years. Its four-year average dividend yield is 2.08%.

Optimistic Analyst Estimates

Analysts expect GRC’s revenue and EPS for the fiscal 2024 fourth quarter that ended December 2024 to increase 1.4% and 32.4% year-over-year to $162.84 million and $0.45, respectively.

For the fiscal 2025 first quarter ending in March, GRC’s revenue and EPS are expected to rise 3.5% and 50% from the prior year’s period to $164.84 million and $0.45, respectively.

Discounted Valuation

GRC is currently trading at a forward non-GAAP PEG of 1.63x, which is 14.7% lower than the industry average of 1.91x. Moreover, the stock’s forward EV/EBITDA multiple stands at 10.97, 8.6% lower than the industry average of 12x.

Additionally, it has a forward Price/Book multiple of 2.59, which is 17.1% lower than the industry average of 3.13x. This indicates that GRC is undervalued compared to its peers, offering potential upside for investors.

POWR Ratings Reflects Optimism

GRC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

GRC has an A grade for Sentiment, which is in line with the optimistic analyst estimates. It earns a B for Value, driven by its discounted valuation metrics relative to the industry average. Moreover, the stock earns a B for Stability, supported by its 60-month beta of 0.96, which reflects low volatility.

Within the A-rated Industrial - Machinery industry, GRC is ranked #3 out of 78 stocks. Beyond what is stated above, we have also given GRC grades for Momentum, Growth, and Quality. Get all GRC ratings here.

Bottom Line

The industry's prospects remain strong, and GRC has positioned itself as a leading player in the industrial manufacturing sector, backed by its solid fundamentals. Additionally, the company’s commitment to returning value to shareholders is evident through its recent dividend payouts.

With robust financials, an attractive valuation, optimistic analyst projections, and low volatility, now may be an opportune time to consider adding GRC to a portfolio.

How Does The Gorman-Rupp Company (GRC) Stack Up Against Its Peers?

Although GRC’s near-term outlook appears sound, it may be worthwhile to explore its industry peers, who also exhibit strong POWR Ratings. So, consider these A (Strong Buy) rated stocks from the Industrial - Machinery industry:

Donaldson Company, Inc. (DCI)

Amada Co., Ltd. (AMDLY)

TechnoPro Holdings, Inc. (TCCPY)

To explore more A or B-rated Industrial - Machinery stocks, click here.

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GRC shares were unchanged in premarket trading Friday. Year-to-date, GRC has declined -0.32%, versus a 3.45% rise in the benchmark S&P 500 index during the same period.

Aritra is a financial journalist dedicated to breaking down complex financial topics into simple, actionable insights. Holding a Master’s degree in Economics, he uses his analytical expertise to help investors uncover unique opportunities for long-term success.

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