Carpenter Technology Corp (NYSE: CRS)

Sector: Industrials Industry: Metal Fabrication CIK: 0000017843
Market Cap 18.78 Bn
P/B 9.82
P/E 45.38
P/S 6.49
ROIC (Qtr) 18.33
Div Yield % 0.27
Rev 1y % (Qtr) 7.55
Total Debt (Qtr) 690.10 Mn
Debt/Equity (Qtr) 0.35
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About

Carpenter Technology Corporation, often referred to as CRS, is a company with a rich history dating back to 1889, specializing in the manufacturing, fabrication, and distribution of specialty metals. The company operates in the specialty metals industry and has established itself as a leader with over 130 years of metallurgical and manufacturing expertise. Carpenter Technology generates revenue through its two reportable business segments: Specialty Alloys Operations (SAO) and Performance Engineered Products (PEP). The SAO segment is responsible...

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Investment thesis

Bull case

  • Strong operating cash flow of 503.70M provides robust 0.73x coverage of total debt 690.10M, indicating excellent debt servicing capability and financial flexibility.
  • Operating cash flow of 503.70M provides strong 20.48x coverage of stock compensation 24.60M, indicating sustainable incentive practices.
  • Operating cash flow of 503.70M provides exceptional 11.07x coverage of interest expenses 45.50M, showing strong debt service capability.
  • Strong tangible asset base of 3.27B provides 4.74x coverage of total debt 690.10M, indicating robust asset backing and low credit risk.
  • Robust free cash flow of 318.10M exceeds capital expenditure of 185.60M by 1.71x, indicating strong organic growth funding capability.

Bear case

  • Operating cash flow of 503.70M barely covers its investment activities of (185.60M), with a coverage ratio of -2.71, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • With cash reserves of 231.90M against inventory of 822.30M, the 0.28 cash-to-inventory ratio suggests potential liquidity risks if inventory turnover slows, particularly concerning given current supply chain volatilities.
  • Operating cash flow of 503.70M provides thin coverage of dividend payments of (40.20M) with a -12.53 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Free cash flow of 318.10M represents just -13.59x of debt issuance (23.40M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Operating cash flow of 503.70M is outpaced by equity issuance of (120.10M) (-4.19 ratio), indicating concerning reliance on equity markets for funding operations.

Segments Breakdown of Revenue (2021)

Peer comparison

Companies in the Metal Fabrication
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 ATI Ati Inc 20.40 Bn 45.86 4.45 1.91 Bn
2 CRS Carpenter Technology Corp 18.78 Bn 45.38 6.49 0.69 Bn
3 MLI Mueller Industries Inc 13.25 Bn 20.13 3.33 0.03 Bn
4 ESAB ESAB Corp 8.11 Bn 30.60 2.96 1.34 Bn
5 WOR Worthington Enterprises, Inc. 4.07 Bn 25.93 1.54 0.35 Bn
6 PRLB Proto Labs Inc 1.57 Bn 106.06 3.04 0.00 Bn
7 RYI Ryerson Holding Corp 0.89 Bn 7.72 0.16 0.86 Bn
8 IIIN Insteel Industries Inc 0.72 Bn 15.23 1.07 0.00 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 5.47 1.76
EV to Cash from Ops. EV/CFO 43.60 24.33
EV to Debt EV to Debt 27.76 75.42
EV to EBIT EV/EBIT 34.30 12.80
EV to EBITDA EV/EBITDA 27.26 -130.25
EV to Free Cash Flow [EV/FCF] EV/FCF 70.74 70.90
EV to Market Cap EV to Market Cap 1.02 0.24
EV to Revenue EV/Rev 6.62 1.91
Price to Book Value [P/B] P/B 9.82 3.80
Price to Earnings [P/E] P/E 45.38 22.15
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 10.82 2.28
Dividend Payout Ratio % Div Payout % (Qtr) 9.20 40.29
Dividend per Basic Share Div per Share (Qtr) 0.60 0.30
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 9.45 265.01
Interest Coverage Int. cover (Qtr) 12.78 618.70
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -77.10 29.14
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 43.06 42.29
Dividend Growth (1y) % Div 1y % (Qtr) -25.00 0.66
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 51.21 -10.15
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 34.05 118.55
EBIT Growth (1y) % EBIT 1y % (Qtr) 61.46 -10.94
EBT Growth (1y) % EBT 1y % (Qtr) 72.76 -12.52
EPS Growth (1y) % EPS 1y % (Qtr) 61.64 -38.14
FCF Growth (1y) % FCF 1y % (Qtr) 24.11 28.40
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 22.87 17.54
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.84 0.97
Cash Payout Ratio Cash Payout (Qtr) 0.06 0.08
Cash Ratio Cash Ratio (Qtr) 0.56 0.67
Current Ratio Curr Ratio (Qtr) 4.25 2.58
Debt to Equity Ratio Debt/Equity (Qtr) 0.35 0.60
Interest Cover Ratio Int Coverage (Qtr) 12.78 618.70
Times Interest Earned Times Interest Earned (Qtr) 12.78 618.70
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 24.60 6.15
EBIT Margin % EBIT Margin % (Qtr) 19.75 2.67
EBT Margin % EBT Margin % (Qtr) 18.20 1.83
Gross Margin % Gross Margin % (Qtr) 28.90 26.31
Net Profit Margin % Net Margin % (Qtr) 14.80 0.14