Wabtec has been treading water for the past six months, recording a small return of 1.5% while holding steady at $203.60.
Does this present a buying opportunity for WAB? Or is its underperformance reflective of its story and business quality? Find out in our full research report, it’s free.
Why Does WAB Stock Spark Debate?
Also known as Wabtec, Westinghouse Air Brake Technologies (NYSE:WAB) provides equipment, systems, and related software for the railway industry.
Two Positive Attributes:
1. Organic Growth Indicates Solid Core Business
Investors interested in Heavy Transportation Equipment companies should track organic revenue in addition to reported revenue. This metric gives visibility into Wabtec’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, Wabtec’s organic revenue averaged 9.5% year-on-year growth. This performance was solid and shows it can expand steadily without relying on expensive (and risky) acquisitions. 
2. 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.
Wabtec’s EPS grew at a remarkable 14.1% compounded annual growth rate over the last five years, higher than its 4.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
One Reason to be Careful:
Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Wabtec’s sales grew at a sluggish 4.2% compounded annual growth rate over the last five years. This wasn’t a great result compared to the rest of the industrials sector, but there are still things to like about Wabtec. 
Final Judgment
Wabtec’s merits more than compensate for its flaws, but at $203.60 per share (or 23.1× forward P/E), is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More Than Wabtec
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