BirayNetworks Article Website

	BirayNetworks Article Website Gathering New Information about Stocks, Health, and Sports

List of Articles Stocks and Investing Stocks I Own Stock Advice Weight Loss and Fitness Sports Donate Back to Home	A Financial Analysis of Pentair Incorporated Introduction Pentair Incorporated (PNR) is a $3.61 billion company in the appliance and tool industry. Market capitalization competitors in this industry include The Stanley Works, Snap-On, and Jarden. The appliance and tool industry down 22.32% over the past year compared to the S&P 500 which is down 6.19% during the same period. Over the past month, the industry has been down 0.25%, while the S&P 500 has been up 2.72%. Strong technical trends may be indicative of a continued expansion in this industry. Evidence comes from a potential turnaround in general equities. Moreover, as there seems to be a bottoming of the housing market, construction-related companies like Pentair will benefit. Also Pentair’s growth and valuation illustrate the potential for a strong earnings report next quarter. Business This section describes what Pentair produces. According to Reuters, Pentair “is a diversified industrial manufacturing company consisting of two business segments: Water and Technical Products.” Both areas are global enterprises. This is great for Pentair. Currency rates are incredibly discounted compared to years prior. Therefore, because of low rates, Pentair will benefit in terms of overall revenue, because foreign nations are more willing to purchase goods at a cheaper price. And as the lower interest rates and fiscal expansionary policy has yet to be fully incorporated, there may be a greater chance for further growth. Moving specifically to the actual two business segments, water products focuses on the movement, storage, and treatment of water. Much of the business is centered on pools, spas, and pumps. Filtration is also important, especially for residential customers. Other water related products provided to customers include, “filters, heaters, lights, automatic controls, automatic pool cleaners, and commercial deck equipment.” The technical products business segment focuses on slightly different areas. These types of products include, “metallic and composite enclosures, cabinets, cases, subracks, and backplanes.” The products are then serviced to a variety of common industries. Growth Pentair has illustrated solid growth prospects over the past year. According to Reuters, Pentair reported a $3.40 billion revenue product last year. This number is up over 8.03% than it was the previous year. Compared to the industry’s average of 13.35%, investors may question the relative growth compared to other competitors. However, Pentair’s growth can be compensated through earnings. Pentair grew at an astonishing 21.93% last year—a number slightly higher than the industry 18.50% average. Competitors such as Stanley Works only saw a 17.59% improvement and Jarden saw a disappointing decrease in earnings of -75.71%. Therefore, there are many positive attributes associated with Pentair’s growth history. In addition, Pentair has kept its costs under control. According to Reuters, Pentair has reported gross, operating, and net profit margins of 30.27%, 11.45%, and 6.44% respectively over the past year. Moreover, these numbers are above or near the industry averages of 30.04%, 8.42%, and 5.69%, respectively. The numbers are also above the company’s five year average respective numbers of 28.91%, 10.65%, and 6.07%. This comparison illustrates a history of strong cost controls and positively-related consitency. The current averages are also better (business model respected) than competitor Jarden’s respective operating and net income averages of 4.64%, and 0.60%. Therefore, Pentair has proved to be a solid company in this industry. Its services are well-controlled cost wise, especially to direct market-cap competitors. Compiling all this information together and investors comes across ROE. Over the past year, Pentair reported an ROE of 12.01%. Therefore, out of all shareholder equity, more than 12% (above five year average) come from earnings instead of debt or stock. This number is bit weaker compared to the industry average of 17.83%, but the number is better than some competitor averages 2.01% (Jarden). Therefore, Pentair has a history of strong earnings per its equity share—which reflects the strong capital gain movement over the past year. And if history is any indication, there should be no reason why Pentair cannot continue its success. The same logic applies to Pentair’s 5.59% ROA (above industry average) and 6.47% ROI (above industry average). Valuation With fairly high growth estimates and historical data, there should be evidence of an overvalued company. However, this is not strictly the case. Pentair has a forward P/E ratio of 15.39 and a price to sales ratio of 1.03 compared to the industry’s respective 15.47 and 0.84, which shows a relatively undervalued status. In comparison, the rest of the market cap competitors have ratios that are lower than Pentair. However, there is a silver lining. What makes Pentair’s figures are more enticing is these competing firms aren’t growing so greatly but have fairly high multiples. That idea shows overvaluation, not the mainframe that Pentair is currently in. Moreover, Pentair has a relatively low PEG (1.32) ratio compared to other competitors’ numbers as well. Efficiency Pentair is efficient. Inventory turnover at 5.91 is strong compared to other industry market-cap rivals (Stanley Works: 4.79). Moreover, asset turnover is also strong at 0.87 compared to competitor figures. Receivables turnover also illustrates a number of 6.01, illustrating cash received every 2 months. In terms of liquidation, Pentair’s current ratio is 2.07. This number is a bit risky, but the company’s capital expenditures have increased (1.85%), which means further increases in capacity and economies of scale may be present in the future, because of this financing. Moreover, institutions own 79.92% of all Pentair shares. Since the institutional investors have a larger gross amount of capital to lose compared to the retail investor, a high institutional percentage illustrates confidence in the stock's ability. Technical Analysis Pentair performed well in the past year. The company’s share price has increased 11.31% year-to-year. This type of growth is great for a recessionary-type economy, especially considering the fact that the housing market and construction is doing so poorly. There seems to be some support at the 28 dollar share price range dating back to earlier January 2008. The last time Pentair reached this amount the company rebounded and appreciated 31%. There is a possibility a similar or better situation could occur in the future. More specific to the current month, Pentair illustrates strong technical signals. Parabolic SAR is below and upward trending the current share price. This event usually signals an upturn in share price. The company is a little undervalued compared to the RSI index at 61.22, but it is better to be an advocate of fundamental valuations before technical valuations. Therefore, while now isn't the most ideal time to purchase shares of Pentair according to technical analysis, purchasing shares will still produce strong long terms gains. Conclusion Pentair is a great acquisition for any portfolio. The company's business model and fundamental analysis are both strong. It is very rare to find a company that has both strong valuation and growth, so it is wise to take advantage of these situations as they arise. -Dennis Biray April 18th, 2008 ©2008 BirayNetworks. All Rights Reserved

List of
Articles

Stocks and Investing

Stocks I Own

Stock Advice

Weight Loss and Fitness

Sports

Donate

Back to Home

A Financial Analysis of Pentair Incorporated

Introduction

Pentair Incorporated (PNR) is a $3.61 billion company in the appliance and tool industry. Market capitalization competitors in this industry include The Stanley Works, Snap-On, and Jarden. The appliance and tool industry down 22.32% over the past year compared to the S&P 500 which is down 6.19% during the same period. Over the past month, the industry has been down 0.25%, while the S&P 500 has been up 2.72%. Strong technical trends may be indicative of a continued expansion in this industry. Evidence comes from a potential turnaround in general equities. Moreover, as there seems to be a bottoming of the housing market, construction-related companies like Pentair will benefit. Also Pentair’s growth and valuation illustrate the potential for a strong earnings report next quarter.

Business

This section describes what Pentair produces. According to Reuters, Pentair “is a diversified industrial manufacturing company consisting of two business segments: Water and Technical Products.” Both areas are global enterprises. This is great for Pentair. Currency rates are incredibly discounted compared to years prior. Therefore, because of low rates, Pentair will benefit in terms of overall revenue, because foreign nations are more willing to purchase goods at a cheaper price. And as the lower interest rates and fiscal expansionary policy has yet to be fully incorporated, there may be a greater chance for further growth.

Moving specifically to the actual two business segments, water products focuses on the movement, storage, and treatment of water. Much of the business is centered on pools, spas, and pumps. Filtration is also important, especially for residential customers. Other water related products provided to customers include, “filters, heaters, lights, automatic controls, automatic pool cleaners, and commercial deck equipment.” The technical products business segment focuses on slightly different areas. These types of products include, “metallic and composite enclosures, cabinets, cases, subracks, and backplanes.” The products are then serviced to a variety of common industries.

Growth

Pentair has illustrated solid growth prospects over the past year. According to Reuters, Pentair reported a $3.40 billion revenue product last year. This number is up over 8.03% than it was the previous year. Compared to the industry’s average of 13.35%, investors may question the relative growth compared to other competitors. However, Pentair’s growth can be compensated through earnings. Pentair grew at an astonishing 21.93% last year—a number slightly higher than the industry 18.50% average. Competitors such as Stanley Works only saw a 17.59% improvement and Jarden saw a disappointing decrease in earnings of -75.71%. Therefore, there are many positive attributes associated with Pentair’s growth history.

In addition, Pentair has kept its costs under control. According to Reuters, Pentair has reported gross, operating, and net profit margins of 30.27%, 11.45%, and 6.44% respectively over the past year. Moreover, these numbers are above or near the industry averages of 30.04%, 8.42%, and 5.69%, respectively. The numbers are also above the company’s five year average respective numbers of 28.91%, 10.65%, and 6.07%. This comparison illustrates a history of strong cost controls and positively-related consitency. The current averages are also better (business model respected) than competitor Jarden’s respective operating and net income averages of 4.64%, and 0.60%. Therefore, Pentair has proved to be a solid company in this industry. Its services are well-controlled cost wise, especially to direct market-cap competitors.

Compiling all this information together and investors comes across ROE. Over the past year, Pentair reported an ROE of 12.01%. Therefore, out of all shareholder equity, more than 12% (above five year average) come from earnings instead of debt or stock. This number is bit weaker compared to the industry average of 17.83%, but the number is better than some competitor averages 2.01% (Jarden). Therefore, Pentair has a history of strong earnings per its equity share—which reflects the strong capital gain movement over the past year. And if history is any indication, there should be no reason why Pentair cannot continue its success. The same logic applies to Pentair’s 5.59% ROA (above industry average) and 6.47% ROI (above industry average).

Valuation

With fairly high growth estimates and historical data, there should be evidence of an overvalued company. However, this is not strictly the case. Pentair has a forward P/E ratio of 15.39 and a price to sales ratio of 1.03 compared to the industry’s respective 15.47 and 0.84, which shows a relatively undervalued status. In comparison, the rest of the market cap competitors have ratios that are lower than Pentair. However, there is a silver lining. What makes Pentair’s figures are more enticing is these competing firms aren’t growing so greatly but have fairly high multiples. That idea shows overvaluation, not the mainframe that Pentair is currently in. Moreover, Pentair has a relatively low PEG (1.32) ratio compared to other competitors’ numbers as well.

Efficiency

Pentair is efficient. Inventory turnover at 5.91 is strong compared to other industry market-cap rivals (Stanley Works: 4.79). Moreover, asset turnover is also strong at 0.87 compared to competitor figures. Receivables turnover also illustrates a number of 6.01, illustrating cash received every 2 months. In terms of liquidation, Pentair’s current ratio is 2.07. This number is a bit risky, but the company’s capital expenditures have increased (1.85%), which means further increases in capacity and economies of scale may be present in the future, because of this financing. Moreover, institutions own 79.92% of all Pentair shares. Since the institutional investors have a larger gross amount of capital to lose compared to the retail investor, a high institutional percentage illustrates confidence in the stock's ability.

Technical Analysis

Pentair performed well in the past year. The company’s share price has increased 11.31% year-to-year. This type of growth is great for a recessionary-type economy, especially considering the fact that the housing market and construction is doing so poorly. There seems to be some support at the 28 dollar share price range dating back to earlier January 2008. The last time Pentair reached this amount the company rebounded and appreciated 31%. There is a possibility a similar or better situation could occur in the future.

More specific to the current month, Pentair illustrates strong technical signals. Parabolic SAR is below and upward trending the current share price. This event usually signals an upturn in share price. The company is a little undervalued compared to the RSI index at 61.22, but it is better to be an advocate of fundamental valuations before technical valuations. Therefore, while now isn't the most ideal time to purchase shares of Pentair according to technical analysis, purchasing shares will still produce strong long terms gains.

Conclusion

Pentair is a great acquisition for any portfolio. The company's business model and fundamental analysis are both strong. It is very rare to find a company that has both strong valuation and growth, so it is wise to take advantage of these situations as they arise.

-Dennis Biray
April 18th, 2008