2 Reasons to Watch CSL and 1 to Stay Cautious

Over the past six months, Carlisle’s shares (currently trading at $363.80) have posted a disappointing 10.2% loss, well below the S&P 500’s 10.1% gain. This may have investors wondering how to approach the situation.

Given the weaker price action, is this a buying opportunity for CSL? Find out in our full research report, it’s free.

Why Does CSL Stock Spark Debate?

Originally founded as Carlisle Tire and Rubber Company, Carlisle Companies (NYSE:CSL) is a multi-industry product manufacturer focusing on construction materials and weatherproofing technologies.

Two Positive Attributes:

1. 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.

Carlisle’s EPS grew at an astounding 24.7% compounded annual growth rate over the last five years, higher than its 3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Carlisle has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 15.3% over the last five years.

One Reason to be Careful:

Slow Organic Growth Suggests Waning Demand In Core Business

Investors interested in Building Materials companies should track organic revenue in addition to reported revenue. This metric gives visibility into Carlisle’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, Carlisle’s organic revenue averaged 2.4% 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

Carlisle’s positive characteristics outweigh the negatives. After the recent drawdown, the stock trades at 18.5× forward P/E (or $363.80 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.

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