Have you been paying attention to shares of nVent Electric (NVT)? Shares have been on the move with the stock up 10.5% over the past month. The stock hit a new 52-week high of $40.52 in the previous session. nVent Electric has gained 5.8% since the start of the year compared to the -29.4% move for the Zacks Computer and Technology sector and the -24.2% return for the Zacks Electronics - Miscellaneous Components industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 28, 2022, nVent reported EPS of $0.66 versus consensus estimate of $0.59 while it beat the consensus revenue estimate by 4.74%.
For the current fiscal year, nVent is expected to post earnings of $2.31 per share on $2.87 billion in revenues. This represents a 17.86% change in EPS on a 16.7% change in revenues. For the next fiscal year, the company is expected to earn $2.47 per share on $2.97 billion in revenues. This represents a year-over-year change of 7.14% and 3.53%, respectively.
nVent may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
nVent has a Value Score of B. The stock's Growth and Momentum Scores are B and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 17.4X current fiscal year EPS estimates, which is not in-line with the peer industry average of 17.4X. On a trailing cash flow basis, the stock currently trades at 15.1X versus its peer group's average of 13.1X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, nVent currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if nVent meets the list of requirements. Thus, it seems as though nVent shares could have a bit more room to run in the near term.
How Does NVT Stack Up to the Competition?
Shares of NVT have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Fabrinet (FN). FN has a Zacks Rank of # 2 (Buy) and a Value Score of B, a Growth Score of A, and a Momentum Score of C.
Earnings were strong last quarter. Fabrinet beat our consensus estimate by 13.22%, and for the current fiscal year, FN is expected to post earnings of $7.48 per share on revenue of $2.63 billion.
Shares of Fabrinet have gained 17.7% over the past month, and currently trade at a forward P/E of 17.85X and a P/CF of 20.25X.
The Electronics - Miscellaneous Components industry may rank in the bottom 70% of all the industries we have in our universe, but there still looks like there are some nice tailwinds for NVT and FN, even beyond their own solid fundamental situation.
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