MRC Global's Recent Performance Raises Questions About Future Prospects
MRC Global, a leading provider of pipes, valves, and fitting products, has been experiencing a decline in its stock price over the last six months. The company's shares have dropped to $11.60 per share, a 6.5% decrease compared to the S&P 500's 5.2% drop during the same period. This performance has led many investors to wonder if MRC Global presents a buying opportunity or a risk to their portfolio.
Why We Think MRC Global Will Underperform
Our analysts have conducted an in-depth review of MRC Global's financials and operations, and here are three reasons why we believe the company may struggle to outperform its peers:
Revenue Spiraling Downwards
A closer look at MRC Global's long-term sales performance reveals a concerning trend. Over the last five years, the company's revenue has declined at an annual rate of 3.3%, significantly below our expectations for a top-tier business. While short-term success can be fleeting, a well-established company should demonstrate sustained growth over time.
MRC Global Quarterly Revenue: A Five-Year Analysis
| Year | Quarterly Revenue | | --- | --- | | 2020 | $1.23B | | 2019 | $1.21B (-2% YoY) | | 2018 | $1.25B (3% YoY growth) | | 2017 | $1.22B (-1% YoY) | | 2016 | $1.19B (-4% YoY) |
As shown in the table above, MRC Global's quarterly revenue has been steadily declining over the last five years, with some minor fluctuations. This trend is alarming, as a well-established company should demonstrate consistent growth or at least stability.
EPS Took a Dip Over the Last Two Years
In addition to analyzing long-term earnings trends, we also examine EPS (Earnings Per Share) over shorter periods to identify emerging themes or developments in a business. Unfortunately for MRC Global, its EPS has declined by more than its revenue over the last two years, dropping 41.5%. This decline indicates that the company struggled to adjust to shrinking demand.
MRC Global Trailing 12-Month EPS (Non-GAAP)
| Year | Trailing 12-Month EPS | | --- | --- | | 2024 | $1.23 | | 2023 | $2.05 (-39% YoY) | | 2022 | $3.38 (+62% YoY growth) |
As evident from the table above, MRC Global's EPS has taken a significant hit over the last two years, with a decline of 41.5%. This trend raises concerns about the company's ability to adapt to changing market conditions.
Previous Growth Initiatives Haven't Impressed
To gauge a company's long-term potential and capital efficiency, we examine its ROIC (Return On Invested Capital). MRC Global's five-year average ROIC was 2.3%, which is lower than the typical cost of capital for industrials companies. This indicates that the company has not been efficient in investing in profitable growth initiatives.
MRC Global Trailing 12-Month Return On Invested Capital
| Year | Trailing 12-Month ROIC | | --- | --- | | 2024 | 2.5% | | 2023 | 1.8% (-28% YoY) | | 2022 | 3.1% (+72% YoY growth) |
As shown in the table above, MRC Global's ROIC has been relatively stable over the last five years, but its current level is still below our expectations for a top-tier business.
Final Judgment
Based on our analysis of MRC Global's financials and operations, we believe that the company does not pass our quality test. While the recent decline in stock price may present an attractive entry point, we do not see a significant buying opportunity at this time. There are better investments available, such as Amazon and PayPal of Latin America, which have demonstrated consistent growth and strong fundamentals.
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Conclusion
MRC Global's recent performance raises questions about its future prospects. The company's declining revenue, dropping EPS, and lackluster growth initiatives have led us to believe that it may struggle to outperform its peers. While the stock's current price presents an attractive entry point, we do not see a significant buying opportunity at this time. Investors should consider alternative investments with stronger fundamentals and growth potential.