Global Industrial (GIC): Buy, Sell, or Hold Post Q2 Earnings?

What a time it’s been for Global Industrial. In the past six months alone, the company’s stock price has increased by a massive 60.4%, reaching $37.33 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is now the time to buy Global Industrial, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Why Do We Think Global Industrial Will Underperform?

We’re glad investors have benefited from the price increase, but we're swiping left on Global Industrial for now. Here are three reasons we avoid GIC and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Global Industrial’s 7.5% annualized revenue growth over the last five years was mediocre. This was below our standard for the industrials sector.

2. EPS Barely Growing

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Global Industrial’s unimpressive 6.1% annual EPS growth over the last five years aligns with its revenue performance. On the bright side, this tells us its incremental sales were profitable.

3. New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Global Industrial’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Final Judgment

We see the value of companies helping their customers, but in the case of Global Industrial, we’re out. Following the recent rally, the stock trades at 21.6× forward P/E (or $37.33 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - you can find more timely opportunities elsewhere. Let us point you toward a top digital advertising platform riding the creator economy.

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