3 Reasons We're Fans of Trane Technologies (TT)

Trane Technologies currently trades at $424.90 and has been a dream stock for shareholders. It’s returned 259% since August 2020, tripling the S&P 500’s 87.5% gain. The company has also beaten the index over the past six months as its stock price is up 21.8% thanks to its solid quarterly results.

Following the strength, is TT a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.

Why Is Trane Technologies a Good Business?

With low-pressure heating systems as its first product, Trane (NYSE:TT) designs, manufactures, and sells HVAC and refrigeration systems, the former to commercial and residential building customers and the latter to commercial truck manufacturers.

1. Skyrocketing Revenue Shows Strong Momentum

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Trane Technologies’s 10.8% annualized revenue growth over the last five years was impressive. Its growth beat the average industrials company and shows its offerings resonate with customers.

2. Outstanding Long-Term EPS Growth

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Trane Technologies’s EPS grew at an astounding 19.3% compounded annual growth rate over the last five years, higher than its 10.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

3. Stellar ROIC Showcases Lucrative Growth Opportunities

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Trane Technologies’s five-year average ROIC was 23.8%, placing it among the best industrials companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

Final Judgment

These are just a few reasons Trane Technologies is a high-quality business worth owning, and with its shares outperforming the market lately, the stock trades at 30.7× forward P/E (or $424.90 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.

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