What a time it’s been for Blue Bird. In the past six months alone, the company’s stock price has increased by a massive 50.6%, reaching $76.20 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now still a good time to buy BLBD? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Is BLBD a Good Business?
With around a century of experience, Blue Bird (NASDAQ:BLBD) is a manufacturer of school buses and complementary parts.
1. Skyrocketing Revenue Shows Strong Momentum
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Blue Bird grew its sales at an exceptional 14.3% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers.
2. 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, Blue Bird’s margin expanded by 21 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 more than its operating profitability. Blue Bird’s free cash flow margin for the trailing 12 months was 12.3%.
3. New Investments Bear Fruit as ROIC Jumps
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
Over the last few years, Blue Bird’s ROIC has increased. This is a great sign when paired with its already strong returns, but we also recognize its lack of profitable growth during the COVID era was the primary reason for the change.
Final Judgment
These are just a few reasons why we think Blue Bird is one of the best industrials companies out there, and after the recent rally, the stock trades at 14.9× forward P/E (or $76.20 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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