Seeking Alpha: Wabtec Is High-Priced And High-Quality In Equal Measure

Westinghouse Air Brake Technologies (NYSE:WAB), or Wabtec, is the sort of company that chronically only looks cheap in the rear view mirror. Wabtec has strong share in the relatively concentrated U.S. market for technologies and components that go into rail cars, locomotives, and transit cars/locomotives, and is moving to replicate that share overseas. Add in a willingness to acquire its way into new markets and an increasing mix of electronic components, and the basic market opportunity looks appealing.

Now, what do you want to pay for it? Wabtec already trades at more than 13x forward EBITDA and appears to price in mid-to-high teens annual FCF growth for the next decade. There's little argument that Wabtec is a leader in large markets and produces strong returns on capital, despite an aggressive ongoing M&A policy. For investors who can take a "don't worry, be happy" view on valuation and/or make a credible argument that Wabtec's growth rate will exceed that which is already implied in the valuation, Wabtec could still be a name to consider but value-focused investors may find it a harder case to make.

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Wabtec Is High-Priced And High-Quality In Equal Measure