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How Is Flowserve Trading Compared to Peers?

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Nov. 20 2020, Updated 3:41 p.m. ET

Flowserve’s valuation

Since 2013, Flowserve’s (FLS) revenues have declined at a CAGR (compound annual growth rate) of 4.1%. But this came on the back of broad end-market weakness in energy, chemicals, and industrials. As an industrial company, FLS’s performances are related to the performance of the macroeconomy. The management has thus guided a 7%–14% revenue decline.

But when the economy is booming, FLS can often secure robust orders and execute them. Its cost-saving efforts should also trigger further growth going forward.

Shares of Flowserve (FLS) currently trade at a PE (price-to-earnings) value of 17.04x. This isn’t cheap compared to FLS’s peers and the industrial sector. The average PE multiple for industrial companies in XLI is 15.68x.

FLS’s large-cap peers, Pentair (PNR), Cameron International (CAM), Emerson Electric (EMR), and Crane (CR), are currently trading at PE multiples of 19.21x, 16.86x, 16.87x, and 13.43x, respectively.

But if you compare the one-year forward ratios of FLS, you’ll see that it’s trading at 18.36x. By comparison, Pentair, Cameron, Emerson, and Crane are trading at one-year forward PE ratios of 14.11x, 32.04x, 16.82x, and 13.54x, respectively.

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Flowserve and peers

FLS is not cheap compared to its peers. But as a flow control equipment player, it enjoys a first-mover advantage and lasting relationships with customers and technologies that are difficult to replicate. Remember, FLS has a market share of 4% and envisions increasing its market share, but its management has guided that its sales could decline in the range of 7%–14% in 2016.

According to data released on May 20, 2016, Flowserve’s stock value has fallen by over 19.5% in the past 12 months, while the SPDR S&P 500 ETF (SPY) has declined 3.6% during the same period.

In the next and final part, we’ll take a look at analyst recommendations for Flowserve.

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