Franklin Electric Co., Inc. – Value Analysis (NASDAQ:FELE) : December 14, 2017

Capitalcube gives Franklin Electric Co., Inc. a score of 72.

Our analysis is based on comparing Franklin Electric Co., Inc. with the following peers – A. O. Smith Corporation, Gorman-Rupp Company, Flowserve Corporation, Regal Beloit Corp, Allied Motion Technologies Inc., AMETEK, Inc., Xylem Inc., Colfax Corporation, Dover Corporation and Servotronics, Inc. (AOS-US, GRC-US, FLS-US, RBC-US, AMOT-US, AME-US, XYL-US, CFX-US, DOV-US and SVT-US).

Investment Outlook

Franklin Electric Co., Inc. has a fundamental score of 72 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • From a peer analysis angle, relative underperformance over the last year has improved more recently.
  • It’s current Price/Book of 3.01 is about median in its peer group.
  • FELE-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • FELE-US has a successful operating model with relatively high net profit margins and asset turns.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • Over the last five years, FELE-US‘s return on assets has improved from median to better than the median among its peers, suggesting the company has found relative operating advantages.
  • The company’s margins are around the peer medians and do not suggest any benefit from a pricing or an operating cost advantage versus peers.
  • FELE-US‘s revenue growth in recent years and current P/E ratio are both around their respective peer medians suggesting that historical performance and long-term growth expectations for the company are largely in sync.
  • The company’s capital investment program suggests it is under-investing in a business that is producing peer median returns.
  • FELE-US has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

FELE-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 10.02% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 19.95%), and a well-cushioned interest coverage level of 10.88x, FELE-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • Of the 10 chosen peers for the company, only 9 of the stocks have an outstanding debt balance. Companies with no debt include GRC-US.

FELE-US has maintained its Quick & Able profile from the recent year-end.

  • FELE-US‘s interest coverage has declined 1.49 points from last year’s high and is now below its five-year average interest coverage of 11.47.
  • Though its interest coverage decreased to 10.88x from 12.37x (in 2016), its peer median remained relatively stable during this period at 9.08x.
  • Interest coverage fell 1.81 points relative to peers.
  • FELE-US‘s debt-EV is less than (but within one standard deviation of) its five-year average debt-EV of 10.97%.
  • Though its debt-EV has remained relatively stable at 10.02% compared to 2016, its peer median has decreased to 19.95% from 21.05% during this period.
  • Relative to peers, debt-EV rose 1.09 percentage points.

Access the detailed analysis for Franklin Electric Co., Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
A. O. Smith Corporation N/A 2.32 56.01 104.8
Gorman-Rupp Company 0 4.76 No interest exp 999
Flowserve Corporation 21.05 2.12 4.41 10.17
Regal Beloit Corp 33.07 2.22 6.42 29.41
Allied Motion Technologies Inc. 27.85 2.8 4.6 36.57
AMETEK, Inc. 18.33 1.59 9.08 30.29
Xylem Inc. N/A 1.76 7.39 23.85
Colfax Corporation 22.76 1.8 9.72 25.52
Dover Corporation 19.95 1.32 6.24 23.33
Servotronics, Inc. 15.14 4.05 17.53 71.6
Franklin Electric Co., Inc. 10.02 2.35 10.88 50.15
Peer Median 19.95 2.22 9.08 30.29
Best In Class 10.02 4.76 No interest exp 999

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Company Profile

Franklin Electric Co., Inc. engages in the development, manufacture, and distribution of water and fuel pumping systems. It operates through the following business segments: Water Systems, Fueling Systems, and Other. The Water Systems segment designs, manufactures, and sells water pumping systems, submersible motors, pumps, electronic controls, and related parts and equipment. The Fueling Systems segment produces and markets fuel pumping, fuel containment, and monitoring and control systems. It also offers pumps, pipe, sumps, fittings, vapor recovery components, electronic controls, monitoring devices, and related parts and equipment. The Other segment includes the unallocated corporate expenses and inter-company eliminations. The company was founded by Edward J. Schaefer and T. Wayne Kehoe in 1944 and is headquartered in Fort Wayne, IN.

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