Vertiv (VRT): 3 Key Factors That Make This Stock Attractive

Vertiv’s Impressive Market Performance

Currently trading at $191.25, Vertiv has delivered remarkable returns for its investors, soaring 852% since February 2021. This far surpasses the S&P 500’s 81.2% increase during the same period. Over the past six months alone, Vertiv’s stock has climbed 36.4%, driven by consistently strong quarterly earnings.

Is Vertiv still a smart investment at this stage, or is its surge primarily the result of investor excitement?

What Makes Vertiv Stand Out?

Vertiv (NYSE:VRT), once a division of Emerson Electric, specializes in producing and maintaining infrastructure technology for data centers and communication networks.

1. Strong Core Operations

For those following the Electrical Systems sector, monitoring organic revenue—excluding the effects of acquisitions, divestitures, and currency changes—offers a clearer picture of a company’s true performance. This metric reveals how Vertiv’s foundational business is performing, free from one-off events that can distort financial results.

In the past two years, Vertiv’s organic revenue has grown at an average annual rate of 21%. This robust growth demonstrates the company’s ability to expand rapidly without depending on costly or risky acquisitions.

2. Expanding Free Cash Flow Margin

While free cash flow often receives less attention in financial statements, it is a crucial indicator because it reflects all operational and capital expenditures, making it less susceptible to manipulation. Ultimately, cash flow is a key measure of financial health.

Vertiv’s free cash flow margin has improved by 7.9 percentage points over the last five years, providing the company with greater flexibility. Over the most recent 12 months, the margin reached 14.1%.

3. Higher Returns on New Investments

Return on invested capital (ROIC) measures how efficiently a company generates operating profit from its total capital base. While high returns are attractive, it’s the positive trend in ROIC that often surprises investors and drives stock prices higher.

Vertiv has seen a notable increase in its ROIC in recent years, signaling that its competitive advantages and opportunities for profitable growth may be expanding.

Our Takeaway

These factors help explain why Vertiv is among our top picks. With its shares recently outperforming the broader market and trading at a forward P/E of 36.7 (or $191.25 per share), is now the right moment to invest?

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