CSW Industrials is a general industrial products company serving a variety of end markets. What drew me into this company was their Rector seal brand. I had a plumber do work and used rector seal products for sealant. He told me to throw away the stuff I got at home depot, only the rector seal was worth using. Apparently this is view shared by a lot of people in the industry. I like that kind of brand loyalty.
The company serves more than just the plumbing market. Their products are also used in HVAC, railroads, and other industrial cases. I think this is an interesting play on near shoring and reindustrialization in the US. CSW products will be used in factories, as well as in home repair and construction.
The company was a spin off in 2014. They also have a bout a 5% insider ownership rate, which is impressive. They credit a lot of this to their employee stock purchase plan which helps employees build equity in the company. Basically, they want employees to benefit from the company doing well, as this creates more incentive for the employees to perform at a high level.
CSWI pays a small dividend (0.44%) which it started in 2019 and has increased every year except 2020. It tries to allocate capital in 2 ways to grow the company. First, is to develop new products. CSW has a long history of quality and works with its customers to develop products they need. They also grow through acquisition. They completed 2 acquisitions in 2022, both completed through cash transactions, not shareholder dilution.
Mine safety disclosures: none.
The company performs at a high rate of efficiency. ROE is at 19.39% ,which is above their 5 year average of 13.98%. The stock is trading around 27x earnings, which is around the 5 year average or 28.5x. EV/EBITDA is 17.02, just slightly above its 5 year average of 16.6.
Looking at those metrics, I would estimate the the stock is currently in the range of fair value, but probably on the high end of that range. Indeed, Morningstar has the fair value at $164.92, and guru focus has it at $156.81. As of writing, the stock price is $171.92, so this confirms my thoughts.
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