The Eastern Company Stock Analysis

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The Eastern Company Stock Analysis

Key Takeaways


Introduction

The research team has curated a comparison set of five companies for The Eastern Company, all of which have enjoyed trending stock growth over the past half-decade. An overview of lessons learned related to the share price increases of these comps has been provided directly below, followed by relevant details on the stock performance of each of the selected comparison companies.

Lessons Learned


1) Wesco International

  • Analyst consensus across industry trades (e.g., Seeking Alpha) as well as Wesco International's local media (e.g., Pittsburgh Post-Gazette) suggests that the company's aggressive acquisition history is the primary driver behind its trending stock growth over the past five years.
  • In particular, Wesco International won a bidding war for its former competitor Anixter in January 2020, which was considered a boon to the company and its attempt to assume greater market leadership in several largely fragmented industry sub-segments.
  • This acquisition came after other notable deals, such as Wesco International's March 2016 acquisition of Atlanta Electrical Distributors.
  • Meanwhile, the company's stock price has most recently benefited from environmental factors, including the pandemic and associated growth in commodity prices, which have enhanced Wesco International's earnings reporting and enabled it to "widely outperform market expectations."

2) RBC Bearings Incorporated

  • Interestingly, in a manner similar to Wesco International, a major driver behind the sustained stock price growth of RBC Bearings Incorporated is the company's merger and acquisition activity of late.
  • Most notably, the company's stock price rose by as much as 21% to reach an all-time high in July 2021 after news broke that RBC Bearings International would acquire the mechanical power transmission business of ABB.
  • This stock price jump followed a similar 16% spike in share value after RBC Bearings International announced its acquisition of Swiss Tool Systems in 2019, a deal that was viewed by markets as enabling the company to "further strengthen its customer base" without major integration hurdles, given the complementary operating structures of the two companies.
  • Meanwhile, analyst coverage (e.g., The Motley Fool) indicates that more measured, sustained growth in the share price of RBC Bearings International over the past half-decade has been driven by the "consistent strength" of the company's various product lines/sales, even in cases where operating efficiency appeared to weaken.

3) The Timken Company

  • Deviating slightly from the preceding peer comps, industry analysts (e.g., Seeking Alpha) assert that The Timken Company's trending stock growth "in the years prior to the COVID-19 pandemic" was driven by the "spectacular performance" of the company's management team, which expanded revenue at an annualized rate of 12.4% through both organic and inorganic investments.
  • Markets were further encouraged by the company's accompanying profits, which jumped from $140.8 million in 2016 to $362.1 million in 2019.
  • Separately, The Timken Company's expansion into the renewable energy sector in 2014 generated bullish commentary and resulted in an incremental boost to share prices over the past half-decade (e.g., Seeking Alpha, Stock News).
  • Now accounting for the organization's second-largest source of revenue at 12% of sales, The Timken Company's renewables business has also been a key driver of share price increases since the pandemic, with business increasing by 50% since the start of the coronavirus outbreak, and with expectations that the unit's organic growth will remain in the "high single-digit/low double-digit range for the next 5 to 10 years."
  • Meanwhile, the slight dip in stock price since the company's latest earnings reporting is viewed as an "overreaction" among market analysts, with industry trades (e.g., Barron's) continuing to assert that The Timken Company is poised to further expand share value as one of the most "undervalued" stocks.

4) CompX International

  • Although there is relatively limited analyst discourse related to CompX International, industry trades such as Simply Wall St. (link 1, link 2) routinely highlight the company's "steady growth" as a key driver of the stock's sustained share price increases in recent years, adding that earnings per share at CompX International have risen by "2.4% on average over the last five years."
  • In tandem, the value of CompX International stock has slowly risen amid investor interest in the stock's ongoing dividends, with shares of the company rising significantly this past March on news of the upcoming $0.20 dividend payment.
  • In particular, the latest jump in share value appears to be driven by investor awareness that CompX International is distributing "less than half its earnings and cash flow" in the form of dividends, therefore providing "room to increase the dividend in time."

5) Stanley Black & Decker

  • Somewhat mirroring Wesco International and RBC Bearings Incorporated, Stanley Black & Decker's share price has benefited over the last half-decade from its "ongoing consolidation of the tools industry and investment in lawn and garden product manufacturer MTD."
  • Recent investments have included IguanaFix (2019), PilloHealth (2019), Evolve Additive solutions (2018) and VizExplorer (2016), with the company's initial 2018 investment in MTD recently culminating this past August in a full acquisition.
  • Although the immediate market response to such investments has been mixed, with the company's share price dropping 2.4% on news of its decision to buy the remaining 80% of MTD, analysts have responded positively in the longer term to Stanley Black & Decker's accumulation of market clout and share through such expansion.
  • Underpinning this inorganic growth strategy, investors have also favored the consistency of Stanley Black & Decker's earnings reporting and "five-year track record of earnings growth."
  • As noted by Simply Wall St. the company expanded "earnings per share at 9.6% a year" over the past half-decade and is therefore viewed in "higher regard" among seasoned investors.
  • Most recently, Stanley Black & Decker's stock price has also risen in response to the "well-documented surge in interest in DIY and home improvement," owing to the company's manufacturing of tradesman tools to both laymen and professionals.


Research Strategy

For this research on stock comparables for The Eastern Company, the research team leveraged the most reputable sources available in the public domain, including The Wall Street Journal, Yahoo! Finance and Bloomberg. In one instance, slightly dated (2018) reporting was included to provide more depth on the historic rise in stock value for a company with less analyst coverage.
Sources
Sources