Flowserve Corp (NYSE:FLS)

S &P 5 star

21% projected earnings growth in 2013 trading at 17 times means this company is undervalued.

Solid company, niche market and great management. Right recipe for long term success and a value at current price point!

A bit expensive at current prices. Thus not a favorite of mine.

A leader in its Industry with Dividends

Infrastructure play, recent lowered price presents a good buying opportunity.

Oil will increase as the world economy stabilizes

Flowserve is perhaps the most efficient company in the field. They've shown a remarkble ability to control costs, while providing innovative solutions to customers' needs. It is a play on both energy and water, both of which will be growth areas in coming years.

The balance sheet is absolutely pristine - no debt, excellent cash flow, great ROE.

Not sexy but necessary! Valves and flow products. Everybody needs them. Also has a good management team that knows how to stay our of debt!

Strengths and Growth Prospects:
-Diversified across many different industries with different product lines
-Specialized, niche markets
-Demand will start to expand or already are expanding once economy turns around
-Spending increasing amounts to develop in emerging markets, and especially China
-Solid track record of organic growth
-Servicing, repairs, and replacement on already sold products account for 75% of sales - steady revenue stream
-Growth especially in water-related equipment
-Very low risk of products becoming obsolete
-Reputation really matters in this industry, since many of Flowserve’s products are especially critical to certain large-scale infrastructure products
-Developed technological platform for clean fuel; many of its products are essential to other forms of alternative energy
-Existing network of 150 Quick Response Centers

-Three years of increasing dividends; current dividend yield of around 1%
-Payout ratio: 13.54
-P/E: 14 (5 year FLS average: 23)
-P/S: 1.36
-P/B: 3.38
-P/CF: 11.25

-Quick ratio: 1.05 (average)
-Current ratio: 1.72
-LT Debt to Equity: 32

-Gross margin: 36 (industry- 7)
-Operating margin: 14 (industry- 3)
-Net profit margin: 10 (industry- 2)

-Return on equity (TTM): 28 (industry- 3; S&P- 10)
-ROE 5 year average: 17
-Increasing revenue in the last 10 fiscal years
-Free cash flow positive for last seven years
-Set SG&A target of 20% of sales or lower, with the percentage trending down from 25.6% in 2006 to 22% in 2008 and 21.6% in the 2009 third quarter

Weaknesses and Potential Challenges:
-Profit margins only recently started moving upwards; might be difficult to maintain these prices
-Free Cash Flow/Sales: 6%- could be better
-Operating cash flow and free cash flow a little erratic; a few recent quarters had negative operating cash flow
-Accounts payable/Total assets has been rising and now stands at 15%
-Cyclical industry
-Currency risk due to large percentage of foreign sales
-Oil and gas, and power markets are volatile
-Continuing difficulties in credit markets

Good earnings.

A boring, but smart company. It is reasonably valued, sells a globally critical product, and more importantly, has brilliant management. From Schwab:

"Through the manufacturing platform, the Company offers a range of aftermarket equipment services, such as installation, advanced diagnostics, repair and retrofitting."

This means they don't just sell you a pump and walk away. They come back in a month to make sure your pump is still pumping. And in a year. And again in 10 years. And when something goes wrong, they fix it. All for a price. This is brilliant!

fls is a high quality producer of myiad needed products used in abroad number and type of companies and it is reasonably priced even after the market's recent swoon and partial recovery.

fool

This is a staple stock that trades in a range. It is near it's month low. Think about how most of the world needs water and oil infrasctructure investments. This company provides the pumps and parts for this infrastructure.

x

It might be a boring pick but you have to love the opportunities that global infrastructural spending will create for this company in the longer term. They've been subtly moving towards water with the acquisition of Calder and remain well diversified across a range of sectors; gas, oil, nuclear, chemicals. I've been researching water related stocks for quite a while and nothing has excited me. Too much investor interest. I feel like this is a relatively unnoticed company. They're growth and performance over the past few years is impressive enough to have me purchasing.

Global infrastructure, strong international presence, relatively good balance sheet, and competent management. This stock could easily be twice what it's selling for, today.

FLS is an industry leader in pumps and valves. Historically, they have concentrated on the O&G segment, but have diversified successfully and rapidly. I expect them to target what will be a huge, expanding market - water. Very sensible balance sheet with plenty of free cash flow.