Is It Time To Reassess Gorman-Rupp (GRC) After Its Recent Share Price Pullback

• If you are wondering whether Gorman-Rupp at around US$59 a share offers good value today, this article will walk through what the current price actually reflects.
• The stock is down about 5.6% over the last week and 10.8% over the last month, while still sitting on a 22.9% year-to-date return and a 63.5% return over the past year.
• Recent attention has focused on Gorman-Rupp as investors reassess companies in the capital goods space, with an eye on how pump and fluid handling businesses are positioned. Broader sector interest and periodic company-specific headlines have helped frame how the market is currently pricing its prospects.
• Right now, Gorman-Rupp scores 2 out of 6 on our valuation checks, as shown by our valuation score. We will compare different valuation approaches to see what that really means, and finish with a more rounded way to think about value than a single number can provide.

Gorman-Rupp scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Gorman-Rupp Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company might be worth by projecting its future cash flows and then discounting those back to today using a required rate of return.

For Gorman-Rupp, the model uses a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $88.3 million. Analysts have provided explicit forecasts out to 2027, with Simply Wall St extrapolating further to build a 10 year path. Under these assumptions, projected free cash flow in 2035 is $117.0 million, all in $ and all below the billion range.

When these cash flows are discounted and combined with a terminal value, the model arrives at an estimated intrinsic value of about $60.35 per share. Against a current share price of roughly $59, that implies the stock trades at a 2.0% discount to this DCF estimate, which is a very small gap in practical terms.

Result: ABOUT RIGHT

Gorman-Rupp is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Gorman-Rupp.

Approach 2: Gorman-Rupp Price vs Earnings

For a profitable business like Gorman-Rupp, the P/E ratio is a useful way to gauge what you are paying for each dollar of earnings, since it directly links the share price to the company’s bottom line.

In general, higher growth expectations or lower perceived risk can support a higher “normal” P/E, while slower expected growth or higher risk tend to justify a lower multiple. Gorman-Rupp currently trades on a P/E of 29.35x, compared with the Machinery industry average of about 26.61x and a broader peer average of 40.16x. It therefore sits between those two benchmarks.

Simply Wall St’s Fair Ratio is a proprietary estimate of what a more tailored P/E might look like for Gorman-Rupp, given factors such as its earnings growth profile, industry, profit margins, market cap and specific risks. This tends to be more targeted than a simple peer or industry comparison, which can mix companies with very different qualities. For Gorman-Rupp, the Fair Ratio is 18.40x, which is meaningfully below the current 29.35x and suggests the shares are trading above that customised estimate of fair value.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Gorman-Rupp Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simply your story about a company, including your view on its fair value and what you expect for future revenue, earnings and margins, all tied directly to a forecast and a price target.

On Simply Wall St’s Community page, used by millions of investors, Narratives give you an easy way to connect Gorman-Rupp’s business story with a financial model, then compare your Fair Value to the current share price so you can decide whether the gap is wide enough for you to consider buying or selling.

Because Narratives on the platform update automatically when new information such as news or earnings is added, your story, your forecast and your fair value stay aligned without you needing to rebuild a spreadsheet each time something changes.

For example, one Gorman-Rupp Narrative might assume a higher fair value with stronger revenue growth and margins, while another might use more conservative assumptions and land on a much lower fair value, showing how two investors can look at the same company and come to very different conclusions.

Do you think there's more to the story for Gorman-Rupp? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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