In a market that has been very, very trying… you can imagine I’ve had to do a heck of a lot of digging to find quality companies to share with you.

But my Growth-Value-Income rating system has yet again come through with a good one.

This electrical parts maker empowers and energizes communities in front of and behind the meter.

Its stock is in a broad uptrend despite the market’s volatility… yet remains undervalued.

The company expects sales growth of 14% to 16% in 2022, which is impressive in this environment.

And with profits expected to grow by 35% over the next couple of years, the company’s future looks bright.

Get all the details on the stock – including its ticker – in this week’s Stock of the Week video.

Click on the image below to watch it.

Transcript

Hi everyone, and welcome to another Stock of the Week.

What have I got for you this week?

Well, in a market which has been very, very trying and testing, you can imagine we’ve had to do a heck of a lot of digging.

And the idea of these Stock of the Week videos is to give you an insight into just how much detail we go into… to give you a “tip of the iceberg” taste of our research. I hope you enjoy them.

The company I’ve got for you this week is Hubbell (HUBB). It’s an American company that manufactures electrical and electronic products for the commercial, industrial, utility and telecommunications markets.

Products include plugs, receptacles, connectors, lighting fixtures, high-voltage testing and measurement equipment, and voice and data signal processing components.

You might say, “Well, what’s the story here, Alpesh?”

Hubbell empowers and energizes communities in front of and behind the meter. So the company’s not going anywhere, in the sense that we’re going to still need electricity.

Revenues are $4.2 billion. And with profits expected to grow by 35% over the next couple of years, the future does look bright for the company.

It’s got good cash flow… I’ll get to those numbers in a moment.

Hubbell anticipates full-year 2022 total sales growth of 14% to 16%, on organic net sales growth of 13% to 15%. Those are impressive numbers in this environment.

It’s got a lot of protection from what we’re seeing – not complete protection from market risk, but a lot of protection from market risk.

So what do I like about this is as a Stock of the Week?

Well, as you’ll know, I’ve got my proprietary indicator, my Growth-Value-Income indicator, which shows an 8 out of 10 for Hubbell.

Now, this is an algorithm which we use to measure the valuation of a company, to measure the revenue growth of a company, to measure income such as dividend yields and cash flow, and to measure momentum.

And we score it out of 10. Anything which is a 7, 8, 9 or 10 is greenlighted.

So Hubbell meets those criteria.

Cash return on capital invested is 10.6%. That’s the amount of cash the company generates on the capital it’s investing.

Deutsche Bank found (and Goldman Sachs still uses to this day) this formula to tell its richest clients which are the best companies. What it found is companies in the top quartile, the top 25% by CROCI, generate 30% per annum over the long term. Not every stock which meets that criterion and not every year, but that’s your average.

That’s a good number. And this company meets that for me.

The stock price has been doing well over the past six months despite a very difficult market environment.

Sortino, which is a measure of the average return versus the risk, or volatility, of missing that, is positive, which is always good.

Volatility is relatively low. It’s below 20%, which is what I like. I want it to be below 20%.

And alpha, or its ability to outperform the market, is good.

So what else do I like?

Well, Hubbell’s been adding to its total assets… turnover is holding steady… and borrowing’s been coming down.

You’ve got positive return on capital employed. I really like the forecast growth at 15.6%. Profitability before interest and tax is forecast to grow at 25%. Pretax profits are forecast to grow 43%.

The valuation of the company – that’s the share price compared with forecast profits – is at a multiple of 22, which isn’t too expensive. I’d like it to be lower, obviously. But it doesn’t really put me off.

So a lot of boxes are ticked off for me here.

When I look at a price chart, the stock’s been holding up fairly steadily. It has a broad-brush upward trend.

On a discount cash flow basis, it’s undervalued only 13%. This measurement can be tricky. These things tend to overshoot. They aren’t scientific measures, they’re mathematical. They’re not scientific in terms of being able to be 100% accurate.

So I definitely think it’s undervalued. I think it can overshoot to the upside.

All of those things remain positive, whichever way we look at this company.

So I’m really pleased to have been able to find this company despite a very difficult market.

Hopefully that gives you just a “tip of the iceberg” idea of what my GVI Investor subscribers get.

Thank you very much.