GG

Graco Inc

GGG
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Graco Inc AI Insights

Informational only. Not investment advice.
As of 2025-12-12

Snapshot

  • Operating margin TTM 26.6% vs industry median 6.7% - 4x advantage with near-zero debt (0.02 D/E) creates fortress balance sheet[Operating Margin TTM]
  • FCF TTM 624.9M (28.5% margin) on just 47.6M capex - asset-light model converts 93% of operating cash to free cash[Free Cash Flow TTM]
  • P/E 29.2x vs median 24.3x and P/S 6.4x vs median 2.2x - premium valuation despite 2.6% 5Y EPS CAGR (below median 13.3%)[P/E Ratio]

Watch Triggers

  • Total Revenue TTM: Growth acceleration above 5% YoY — Current 2.2B revenue with stagnant EPS growth - organic acceleration would justify premium
  • Operating Margin TTM: Compression below 24% — 26.6% margin is core to thesis - erosion signals competitive pressure or cost inflation
  • Purchase of Business: Large acquisition >200M — 618.7M cash enables transformative M&A - execution risk increases with deal size

Bull Case

Exceptional capital efficiency: ROIC 19% (4x industry median 4.8%) with 0.02 D/E means nearly all returns accrue to equity holders

ROIC TTMDebt to EquityROE TTM

Cash fortress (618.7M) with minimal debt enables M&A optionality - 59.7M deployed TTM with capacity for 10x larger deals

Cash and EquivalentsTotal DebtPurchase of Business

Bear Case

Valuation assumes growth that isn't materializing: P/S 6.4x (2.9x industry median) yet 5Y EPS CAGR only 2.6% vs 13.3% median

P/S RatioEPS Growth 5YP/E Ratio

Goodwill 560.5M is 21% of equity - M&A strategy carries integration risk if acquisitions underperform

GoodwillCommon Stockholders EquityPurchase of Business

Bull vs Bear Balance

AI-generated sentiment analysis based on fundamental metrics and market conditions.

BearBull
45%

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Forward Thesis

Cash generation sustains premium multiple but growth re-acceleration needed to justify valuation

1-3ymed
  • 28.5% FCF margin funds dividends + M&A without debt
  • 618.7M cash (9.3x total debt) enables opportunistic acquisitions
  • 5Y EPS CAGR 2.6% significantly trails industry median 13.3%
FCF TTM 624.9M vs 45.6M dividends paid59.7M purchase of business TTM shows M&A activityRevenue 2.2B at 0.71x asset turnover (at industry median)
Valuation Context
Caveats

Public Strategies Rankings

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Fundamental company data provided by Morningstar, updated daily.

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