Hayward has been treading water for the past six months, recording a small loss of 1.8% while holding steady at $16.06. The stock also fell short of the S&P 500’s 7.2% gain during that period.
Is there a buying opportunity in Hayward, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Hayward Not Exciting?
We don’t have much confidence in Hayward. Here are three reasons why HAYW doesn’t excite us, plus one stock we’d rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Hayward’s sales grew at a sluggish 2% compounded annual growth rate over the last five years. This was below our standards.
2. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Hayward’s full-year EPS dropped 44.5%, or 9.6% annually, over the last four years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Hayward’s low margin of safety could leave its stock price susceptible to large downswings.
3. Free Cash Flow Margin Dropping
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, Hayward’s margin dropped by 8.9 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. Hayward’s free cash flow margin for the trailing 12 months was 7%.
Final Judgment
Hayward’s business quality ultimately falls short of our standards. With its shares trailing the market in recent months, the stock trades at 18.1× forward P/E (or $16.06 per share). This valuation multiple is fair, but we don’t have much faith in the company. We’re pretty confident there are superior stocks to buy right now. Let us point you toward one of our all-time favorite software stocks.
Stocks We Like More Than Hayward
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