Daily Stock Pick: May 12th, 2023

The market loves “exciting” stocks – especially in tech. Just look at all the hype around AI at the moment (I’m not saying AI is overrated, but you can clearly see that we’re approaching the peak of the hype cycle).

To be sure, hype sells – and if you have good timing, you can stand to make fast money from it. And a lot of these exciting technologies do indeed have the potential to change the world – with many having already done so.

Today’s daily stock pick is the OPPOSITE of all that. It’s in one of the most boring industries conceivable – industrial pumps, valves, seals, and actuators (just reading that is enough to put some people to sleep).

Yet, this stock has also defied the market – having increased 20% over the past year. It also just crushed analyst expectations in its recent earnings report, with its earnings per share coming in an impressive 60% higher than consensus estimates.

Flowserve Corporation (FLS)

Flowserve is one of the largest suppliers of industrial and environmental machinery such as pumps, valves, end face mechanical seals, automation, and services to the power, oil, gas, chemical and other industries. It is a multinational corporation with operations in 56 countries.

Although Flowserve stock has already defied the market – rising 20% over the past year – it could still have a ways to go. The company has a PEG (price-earnings-growth ratio) of 0.92 compared to the industry average of 1.49.

In short, for Flowserve’s PEG ratio to catch up with the industry average, its stock would have to undergo substantial appreciation. On top of that, Flowserve just crushed its recent earnings, with its earnings per share coming in at $0.40 compared to the consensus estimate of $0.25.

Its top-line revenue of $980 million (a 19% year-over-year growth) was also nearly 10% higher than the consensus estimate of about $900 million.

Finally, Flowserve also believes in sharing its profits with shareholders, paying out a median of 70% of earnings as dividends.

In sum, with a strong operational profile, rising earnings, potential undervaluation, and steady dividends – Flowserve may be a boring but strong addition to any portfolio.

To your wealth,
Felix @ Ace of Investing