According to FAST Graphs™ – fundamentals analyzer software tool – Curtiss-Wright Corp (CW) is a company that is currently undervalued. The company is forecast to grow at over 11% each year and can be bought at a bargain PE Ratio of 12.7. The conservative investor may want to do their own due diligence further into this company for possible inclusion in their own portfolio.
About Curtiss-Wright Corp: Directly from their website
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“Curtiss-Wright Corporation is an innovative engineering company that provides highly engineered, critical function products, systems and services in the areas of flow control, motion control and metal treatment to the defense, energy and commercial/industrial markets. The legacy company of Glenn Curtiss and the Wright brothers, Curtiss-Wright has a long tradition of design and manufacturing innovation along with long-standing customer relationships. The company employs approximately 8,600 people worldwide.”
Earnings Determine Market Price: The following earnings and price correlated F.A.S.T. Graphs™ clearly illustrates the importance of earnings. The Earnings Growth Rate Line or True Worth™ Line (orange line with white triangles) is correlated with the historical stock price line. On graph after graph the lines will move in tandem. If the stock price strays away from the earnings line (over or under), inevitably it will come back to earnings.
Earnings & Price Correlated Fundamentals-at-a-Glance
A quick glance at the historical earnings and price correlated FAST Graphs™ on Curtiss-Wright Corp shows a slight picture of undervaluation based upon the historical earnings growth rate of 10.6% and a current PE of 12.7. Analysts are forecasting the earnings growth to continue at about 11.3%, and when you look at the forecasting graph below, the stock appears overvalued, (it’s inside of the value corridor of the five orange lines – based on future growth).
Curtiss-Wright Corp: Historical Earnings, Price, Dividends and Normal PE Since 1999
Performance Table Curtiss-Wright Corp
The associated performance results with the earnings and price correlated graph, validates the principles regarding the two components of total return; capital appreciation and dividend income. Dividends are included in the total return calculation and are assumed paid, but not reinvested.
When presented separately like this, the additional rate of return a dividend paying stock produces for shareholders becomes undeniably evident. In addition to the 9.4% capital appreciation (green circle), long-term shareholders of Curtiss-Wright Corp, assuming an initial investment of $1,000, would have received an additional $319.73 in dividends (blue highlighting) that increased their total return from 9.4% to 10.1% per annum versus 1.3% (red circle) in the S&P 500.
The following graph plots the historical PE ratio (the dark blue line) in conjunction with 10-year Treasury note interest. Notice that the current price earnings ratio on this quality company is as low as it has been since 1999.
A further indication of valuation can be seen by examining a company’s current price to sales ratio relative to its historical price to sales ratio. The current price to sales ratio for Curtiss-Wright Corp is .73 which is historically low.
Looking to the Future
Extensive research has provided a preponderance of conclusive evidence that future long-term returns are a function of two critical determinants:
1. The rate of change (growth rate) of the company’s earnings
2. The price or valuation you pay to buy those earnings
Forecasting future earnings growth, bought at sound valuations, is the key to safe, sound, and profitable performance.
The Estimated Earnings and Return Calculator Tool is a simple yet powerful resource that empowers the user to calculate and run various investing scenarios that generate precise rate of return potentialities. Thinking the investment through to its logical conclusion is an important component towards making sound and prudent commonsense investing decisions.
The consensus of 7 leading analysts reporting to Capital IQ forecast Curtiss-Wright Corp’s long-term earnings growth at 11.3% (orange circle). Curtiss-Wright Corp has medium long-term debt at 32% of capital (red circle). Curtiss-Wright Corp is currently trading at a P/E of 12.7, which is inside the value corridor (defined by the five orange lines) of a maximum P/E of 18. If the earnings materialize as forecast, Curtiss-Wright Corp’s True Worth™ valuation would be $71.05 at the end of 2018 (brown circle on EYE Chart), which would be a 16.6% annual rate of return from the current price (yellow highlighting).
Earnings Yield Estimates
Discounted Future Cash Flows: All companies derive their value from the future cash flows (earnings) they are capable of generating for their stakeholders over time. Therefore, because Earnings Determine Market Price in the long run, we expect the future earnings of a company to justify the price we pay.
Since all investments potentially compete with all other investments, it is useful to compare investing in any prospective company to that of a comparable investment in low risk Treasury bonds. Comparing an investment in Curtiss-Wright Corp to an equal investment in 10 year Treasury bonds, illustrates that Curtiss-Wright Corp’s expected earnings would be 8.4 (purple circle) times that of the 10 Year T-Bond Interest. (See EYE chart below). This is the essence of the importance of proper valuation as a critical investing component.
Summary & Conclusions
This report presented essential “fundamentals at a glance” illustrating the past and present valuation based on earnings achievements as reported. Future forecasts for earnings growth are based on the consensus of leading analysts. Although, with just a quick glance you can know a lot about the company, it’s imperative that the reader conducts their own due diligence in order to validate whether the consensus estimates seem reasonable or not.
Disclosure: No position at the time of writing.
Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation. A comprehensive due diligence effort is recommended.