2 Reasons to Like ITT and 1 to Stay Skeptical

ITT trades at $170.48 per share and has stayed right on track with the overall market, gaining 12.4% over the last six months. At the same time, the S&P 500 has returned 13.4%.

Is now a good time to buy ITT? Find out in our full research report, it’s free for active Edge members.

Why Does ITT Spark Debate?

Playing a crucial role in the development of the first transatlantic television transmission in 1956, ITT (NYSE:ITT) provides motion and fluid handling equipment for various industries

Two Things to Like:

1. Increasing Free Cash Flow Margin Juices Financials

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

As you can see below, ITT’s margin expanded by 17.4 percentage points over the last five years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell. ITT’s free cash flow margin for the trailing 12 months was 14.5%.

2. Stellar ROIC Showcases Lucrative Growth Opportunities

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

ITT’s five-year average ROIC was 20.4%, 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.

One Reason to be Careful:

Slow Organic Growth Suggests Waning Demand In Core Business

In addition to reported revenue, organic revenue is a useful data point for analyzing Gas and Liquid Handling companies. This metric gives visibility into ITT’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.

Over the last two years, ITT’s organic revenue averaged 5.2% year-on-year growth. This performance was underwhelming and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations.

Final Judgment

ITT has huge potential even though it has some open questions, but at $170.48 per share (or 23.2× forward P/E), is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .

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