Should Investors Buy Wabtec Stock Despite Its Higher Valuation?

Wabtec Corporation WAB looks expensive from a valuation standpoint. Considering the forward 12-month price-to-sales ratio (P/S-F12M), WAB is trading at a premium compared to the industry.

The stock has a forward 12-month P/S-F12M of 2.95X compared with 2.07X for the industry over the past five years. The company’s forward 12-month P/S-F12M ratio is also above the median level of 2.06X over the past five years. These factors indicate that the stock’s valuation is unattractive. WAB has a Value Score of D.

WAB P/S Ratio (Forward 12 Months) Vs. Industry

Now, the question is whether it is worth buying, holding, or selling the WAB stock at current prices. Let us delve deeper to find out.

Risks Weighing on WAB Stock

Although economic activities have picked up from the pandemic gloom, some supply-chain disruptions remain. Factors like higher commodity costs and shortage of components, chips and labor are major headwinds. High operating expenses are hurting Wabtec's bottom line. Total operating expenses increased 9.7% year over year in 2023. Operating costs increased 4.8% in 2024, mainly due to higher SG&A costs. Total operating expenses in the first six months of 2025 increased 5.3% from the year-ago quarter to $892 million.

Further, Wabtec has substantial operations outside the United States and generates a significant portion of its net revenues from sales to customers outside the country. Hence, volatility in foreign exchange is a significant concern. Economic and political uncertainty is an overhang on the company’s financials.

WAB Stock’s Price Performance

Shares of Wabtec stock have gained 10.6% over the past year, outperforming the Zacks  Transportation - Equipment and Leasing industry’s 13.6% decline, as well as that of another industry player, The Greenbrier Companies, Inc. (GBX). However, WAB’s price performance compares unfavorably with that of another industry player, Ryder Corporation R, within the same time frame.

WAB Stock's One-Year Price Comparison

Factors Working in Favor of WAB Stock

WAB’s focus on new technologies improves the safety, cost and reliability of railroads, supporting the modernization of global rail fleets. Of late, WAB has introduced a number of significant new products, including PTC equipment that includes onboard digital data and global positioning communication protocols.

To combat inflationary pressures, WAB is focusing on cost-cutting measures and making efforts to improve productivity and efficiency. WAB also aims to boost profitability by exiting various low-margin product offerings through portfolio optimization. Apart from cost control initiatives, WAB aims to provide real-time visibility and optimization to help busy railroads stay on schedule and recover from disruptions faster, which should help acquire and retain customers.

Its strong free cash flow-generating ability helps in making consistent dividend payments and share buybacks. Such shareholder-friendly initiatives should boost investor confidence and positively impact the bottom line.

What Do Earnings Estimates Say for WAB?

The positive sentiment surrounding WAB stock is evident from the fact that the Zacks Consensus Estimate for the remaining quarters of 2025, as well as for full-year 2025 and 2026 earnings, has been revised upward in the past 60 days.

Time to Buy WAB Stock Now

The positive developments, like focus on new technologies to improve safety and reliability, together with its restructuring actions and cost-cutting initiatives, coupled with its shareholder-friendly moves in the form of dividend payments and share buybacks, have likely led to WAB’s premium valuations, as investors have high expectations for the company’s prospects and profitability. Consequently, they are willing to pay a premium for the stock, anticipating that it will outperform its peers and the broader market in the coming months.

The positives surrounding the stock (as highlighted throughout the write-up) outweigh the concerns regarding the economic and political uncertainty, lingering supply chain issues and high operating expenses. We, therefore, encourage investors to add WAB stock to their portfolios for healthy returns. The company’s Zacks Rank #2 (Buy) further supports our thesis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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