Franklin Electric Co Inc (NASDAQ: FELE)

Sector: Industrials Industry: Specialty Industrial Machinery CIK: 0000038725
Market Cap 4.49 Bn
P/B 7.31
P/E 53.75
P/S 4.60
ROIC (Qtr) 9.31
Div Yield % 0.63
Rev 1y % (Qtr) 9.46
Total Debt (Qtr) 270.72 Mn
Debt/Equity (Qtr) 0.21
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About

Franklin Electric Co., Inc., often recognized by its ticker symbol FELE, is a prominent player in the water and fuel pumping systems industry. Established in 1944 and incorporated in 1946, this Indiana-based company has grown into a global leader, generating approximately $2.1 billion in revenue in 2023. Franklin Electric's operations span across three main segments: Water Systems, Fueling Systems, and Distribution. The Water Systems segment is Franklin Electric's primary focus, accounting for around 60% of the company's total revenue in 2023....

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Investment thesis

Bull case

  • Strong operating cash flow of 244.95M provides robust 0.90x coverage of total debt 270.72M, indicating excellent debt servicing capability and financial flexibility.
  • Operating cash flow of 244.95M provides exceptional 126.40x coverage of minority interest expenses 1.94M, showing strong core operations.
  • Operating cash flow of 244.95M provides strong 19.96x coverage of stock compensation 12.28M, indicating sustainable incentive practices.
  • Operating cash flow of 244.95M provides exceptional 25.95x coverage of interest expenses 9.44M, showing strong debt service capability.
  • Strong tangible asset base of 1.35B provides 4.97x coverage of total debt 270.72M, indicating robust asset backing and low credit risk.

Bear case

  • Operating cash flow of 244.95M barely covers its investment activities of (153.44M), with a coverage ratio of -1.60, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • With cash reserves of 102.93M against inventory of 569.18M, the 0.18 cash-to-inventory ratio suggests potential liquidity risks if inventory turnover slows, particularly concerning given current supply chain volatilities.
  • Operating cash flow of 244.95M provides thin coverage of dividend payments of (48.62M) with a -5.04 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 102.93M provide limited coverage of acquisition spending of (114M), which is -0.90x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Operating earnings of 194.25M show weak coverage of depreciation charges of 83M, with a 2.34 ratio indicating high capital intensity and potential reinvestment needs.

Segments Breakdown of Revenue (2024)

Segments Breakdown of Revenue (2024)

Peer comparison

Companies in the Specialty Industrial Machinery
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 GEV GE Vernova Inc. 224.93 Bn 194.57 6.14 0.00 Bn
2 ETN Eaton Corp plc 153.13 Bn 38.99 5.75 11.22 Bn
3 PH Parker-Hannifin Corp 135.87 Bn 165.29 12.09 9.87 Bn
4 EMR Emerson Electric Co 111.68 Bn 47.10 4.65 13.41 Bn
5 ITW Illinois Tool Works Inc 86.68 Bn 28.27 5.40 8.97 Bn
6 CMI Cummins Inc 82.13 Bn 28.89 2.44 7.55 Bn
7 AME Ametek Inc/ 53.79 Bn 36.34 7.27 2.28 Bn
8 ROK Rockwell Automation, Inc 43.80 Bn 44.24 5.11 3.68 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 2.27 2.28
EV to Cash from Ops. EV/CFO 48.47 37.14
EV to Debt EV to Debt 16.77 34.39
EV to EBIT EV/EBIT 36.76 27.71
EV to EBITDA EV/EBITDA 28.48 25.34
EV to Free Cash Flow [EV/FCF] EV/FCF 125.83 133.36
EV to Market Cap EV to Market Cap 1.01 1.04
EV to Revenue EV/Rev 4.66 39.88
Price to Book Value [P/B] P/B 7.31 6.22
Price to Earnings [P/E] P/E 53.75 143.63
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 2.91 2.57
Dividend Payout Ratio % Div Payout % (Qtr) 33.90 15.73
Dividend per Basic Share Div per Share (Qtr) 1.05 0.91
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 22.74 82.53
Interest Coverage Int. cover (Qtr) 20.58 12.34
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -4.19 -45.99
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -3.15 118.48
Dividend Growth (1y) % Div 1y % (Qtr) 40.00 10.01
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -21.83 -283.03
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -11.98 -36.87
EBIT Growth (1y) % EBIT 1y % (Qtr) -20.32 -80.72
EBT Growth (1y) % EBT 1y % (Qtr) -22.13 -120.93
EPS Growth (1y) % EPS 1y % (Qtr) -22.69 -39.22
FCF Growth (1y) % FCF 1y % (Qtr) -10.77 85.55
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 5.00 0.87
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 1.06 0.62
Cash Payout Ratio Cash Payout (Qtr) 0.17 0.10
Cash Ratio Cash Ratio (Qtr) 0.26 3.01
Current Ratio Curr Ratio (Qtr) 2.54 4.97
Debt to Equity Ratio Debt/Equity (Qtr) 0.21 0.38
Interest Cover Ratio Int Coverage (Qtr) 20.58 12.34
Times Interest Earned Times Interest Earned (Qtr) 20.58 12.34
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 13.10 -7,291.27
EBIT Margin % EBIT Margin % (Qtr) 9.21 -7,413.30
EBT Margin % EBT Margin % (Qtr) 8.76 -9,015.79
Gross Margin % Gross Margin % (Qtr) 35.50 -32.61
Net Profit Margin % Net Margin % (Qtr) 6.70 -7,962.06