Over the past six months, Core & Main has been a great trade. While the S&P 500 was flat, the stock price has climbed by 19.3% to $52.53 per share. This performance may have investors wondering how to approach the situation.

Is now still a good time to buy CNM? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.

Why Is CNM a Good Business?

Formerly a division of industrial distributor HD Supply, Core & Main (NYSE:CNM) is a provider of water, wastewater, and fire protection products and services.

1. Skyrocketing Revenue Shows Strong Momentum

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, Core & Main’s 17% annualized revenue growth over the last five years was incredible. Its growth surpassed the average industrials company and shows its offerings resonate with customers.Core & Main Quarterly Revenue

2. Operating Margin Rising, Profits Up

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Analyzing the trend in its profitability, Core & Main’s operating margin rose by 4.7 percentage points over the last five years, as its sales growth gave it operating leverage. Its operating margin for the trailing 12 months was 9.7%.Core & Main Trailing 12-Month Operating Margin (GAAP)

3. Outstanding Long-Term EPS Growth

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Core & Main’s EPS grew at an astounding 60.2% compounded annual growth rate over the last five years, higher than its 17% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.Core & Main Trailing 12-Month EPS (Non-GAAP)

Final Judgment

These are just a few reasons why we're bullish on Core & Main, and with its shares outperforming the market lately, the stock trades at 21.6× forward P/E (or $52.53 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

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