EnPro Becoming A Slimmer, More Profitable, And Less Cyclical Multi-Industrial

EnPro (NYSE:NPO) management has been transparent about its intentions to continue to remake the company into a more niche-oriented multi-industrial focused on less-cyclical, faster-growing markets, and with a product portfolio more skewed to high barriers to entry driven by engineering and sticky customer relationships. With the sale of GGB done, EnPro goes into 2023 focused on its specialty Sealing Technologies and Advanced Surface Technologies businesses, both of which offer better growth and margins than the company's historical trends.

These shares have done well since my last update, appreciating more than 15% and beating both the S&P 500 and the wider industrial group.

I do see some near-term sentiment risk for EnPro, as the company is heavily dependent upon the semiconductor industry and still has meaningful exposure to cycle markets like heavy-duty trucks and short-cycle "general industrial". While 2023 likely won't be a banner year, I do think the company is well-placed for organic growth in the mid-single-digits and strong EBITDA and free cash flow margins. The shares aren't particularly cheap now, and I'd rather wait in the hopes of a pullback, but I like the strategy management is following, and I think EnPro can be a long-term outperformer in the multi-industrial segment.

 

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EnPro Becoming A Slimmer, More Profitable, And Less Cyclical Multi-Industrial