Buy or Sell Franklin Electric Stock?

Franklin Electric (FELE) stock has fallen 15% during the past day, and is currently trading at $92.98. We believe there is a near-equal mix of good and bad in FELE stock given its overall Moderate operating performance and financial condition. This is aligned with the stock’s Moderate valuation because of which we think it is Fairly Priced.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $4.1 Bil in market cap, Franklin Electric provides water and fuel pumping systems, including submersible motors, pumps, controls, water treatment, vapor recovery components, and distribution support for installing contractors.

[1] Valuation Looks Moderate

This table highlights how FELE is valued vs broader market. For more details see: FELE Valuation Ratios

[2] Growth Is Moderate

• Franklin Electric has seen its top line grow at an average rate of 2.1% over the last 3 years
• Its revenues have grown 5.1% from $2.0 Bil to $2.1 Bil in the last 12 months
• Also, its quarterly revenues grew 9.5% to $582 Mil in the most recent quarter from $531 Mil a year ago.

This table highlights how FELE is growing vs broader market. For more details see: FELE Revenue Comparison

[3] Profitability Appears Moderate

• FELE last 12 month operating income was $264 Mil representing operating margin of 12.5%
• With cash flow margin of 11.6%, it generated nearly $245 Mil in operating cash flow over this period
• For the same period, FELE generated nearly $141 Mil in net income, suggesting net margin of about 6.7%

This table highlights how FELE profitability vs broader market. For more details see: FELE Operating Income Comparison

[4] Financial Stability Looks Strong

• FELE Debt was $271 Mil at the end of the most recent quarter, while its current Market Cap is $4.1 Bil. This implies Debt-to-Equity Ratio of 6.6%
• FELE Cash (including cash equivalents) makes up $103 Mil of $2.0 Bil in total Assets. This yields a Cash-to-Assets Ratio of 5.2%

[5] Downturn Resilience Is Moderate

FELE saw an impact slightly better than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• FELE stock fell 29.4% from a high of $96.69 on 23 November 2021 to $68.28 on 26 April 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 23 February 2023
• Since then, the stock increased to a high of $110.40 on 25 November 2024 , and currently trades at $92.98

 
2020 Covid Pandemic

• FELE stock fell 32.0% from a high of $60.94 on 5 February 2020 to $41.43 on 25 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 6 October 2020

 
2008 Global Financial Crisis

• FELE stock fell 66.5% from a high of $25.89 on 19 July 2007 to $8.67 on 5 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 1 February 2012

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read FELE Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.