Enpro Has Continued To Pivot Toward Less Cyclical, More Profitable Business

At a point in the cycle where the market really isn’t fond of short-cycle industrial exposure, Enpro’s (NYSE:NPO) decision to shift toward faster-growing, higher-margin, and less typically cyclical business is looking better and better. Since my last update, not only has the company steadily beaten expectations (including full-year results that were comfortably above my expectations), but the shares have outperformed the broader industrial group by almost 15%, with a 16% total return that also surpasses what the S&P 500 has returned.

Given Enpro’s greater leverage to a faster-growing semiconductor end-market, my long-term revenue growth estimate moves from around 4% to between 5% and 6%, and I see stronger long-term FCF margins as well. I still see these shares offering more than 10% near-term upside, as well as long-term total annualized return potential in the high-single-digits, which is better than what most industrials are offering today.

 

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EnPro Has Continued To Pivot Toward Less Cyclical, More Profitable Business