AZZ INC: A Peter Lynch-Style Growth Pick at a Reasonable Price
The Peter Lynch investment strategy, as laid out in his classic book One Up on Wall Street, focuses on finding growing companies that still trade at reasonable valuations. Rather than chasing the fastest-growing names in the market, Lynch sought out businesses with sustainable earnings growth — typically between 15% and 30% per year — that were also financially healthy and not overly expensive. The idea is to build a long-term portfolio of companies whose earnings power will eventually be reflected in their share prices, without paying a premium upfront that eats into future returns.
AZZ INC (NYSE:AZZ) is a company that fits this framework quite well. AZZ provides hot-dip galvanizing and coil coating solutions primarily for the North American steel fabrication and construction industries. Its business is not glamorous, but it is essential — exactly the kind of "boring" operation Lynch appreciated, where steady demand and recurring service revenue can compound over time.
How AZZ Meets the Lynch Criteria
The screen that identified AZZ is built directly on Lynch's investment rules. Let's look at how AZZ measures up against those core filters:
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EPS 5-Year Growth (23.90%): Lynch required earnings growth between 15% and 30% annually over the past five years. AZZ's EPS growth of 23.90% sits comfortably within this range — fast enough to indicate a growing business, but not so fast that it becomes unsustainable or speculative.
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PEG Ratio (0.98): A PEG ratio below 1.0 is Lynch's key valuation check. It compares the P/E ratio to the earnings growth rate. AZZ’s PEG of 0.98 means the stock is priced roughly in line with its earnings growth, which is attractive for a growth-at-a-reasonable-price investor. It also suggests that the market has not yet fully priced in the company's historical growth trajectory.
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Return on Equity (23.73%): ROE above 15% is a sign of healthy profitability and efficient use of shareholder capital. AZZ’s ROE of 23.73% comfortably clears this bar and is better than 80% of its peers in the Building Products industry.
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Debt/Equity (0.37): Lynch was conservative with debt, preferring companies that are equity-funded rather than debt-laden. AZZ's D/E ratio of 0.37 is well below the 0.6 maximum and even below Lynch's own preferred threshold of 0.25.
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Current Ratio (1.70): A current ratio above 1.0 ensures the company can cover its short-term liabilities with its short-term assets. AZZ’s ratio of 1.70 indicates solid liquidity without being excessive.
Each of these metrics reinforces why AZZ is a candidate for Lynch-style investors. The combination of double-digit earnings growth, a reasonable valuation, strong profitability, and a healthy balance sheet mirrors the exact profile Lynch looked for when constructing his portfolio.
A High-Level Look at the Fundamental Report
Digging deeper into the fundamental analysis, AZZ receives an overall score of 6 out of 10, with standout strength in profitability. The company's profit margin of 19.23% outperforms nearly 98% of its industry peers, and its operating margin has been steadily improving. Return on assets and return on equity are both well above industry averages, signaling efficient capital use.
On the health front, AZZ's Altman-Z score of 4.69 indicates a very low risk of bankruptcy. Its debt-to-free-cash-flow ratio of 1.11 means the company could theoretically pay off all its debt in just over a year — a strong sign of solvency. The quick ratio of 1.21 also suggests the company can handle short-term obligations without relying on inventory sales.
Valuation is a mixed bag. The P/E ratio of 23.39 is slightly above the industry average, but the price-to-free-cash-flow multiple is significantly cheaper than 87.5% of peers. The PEG ratio, as noted, remains below 1.0. Growth is moderating, with expected EPS growth of 6% annually in the coming years, down from the rapid 23.90% pace of the past five years. This deceleration is not unusual for a maturing industrial business, but it does mean investors should monitor future catalysts closely.
Finding More Opportunities Like AZZ
AZZ is just one example of the kind of company that can emerge from a disciplined Peter Lynch screen. For investors who want to explore other stocks that meet the same criteria — sustainable growth, reasonable valuation, strong profitability, and a solid balance sheet — you can run the screen yourself and adjust the parameters to fit your preferences. Click here to view the full results of the Peter Lynch stock screener and find additional candidates for your long-term portfolio.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always conduct your own research before making any investment decisions.
Read full article here »
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AZZ INC (NYSE:AZZ): A Growth at a Reasonable Price Stock
AZZ INC: A Peter Lynch-Style Growth Pick at a Reasonable Price
The Peter Lynch investment strategy, as laid out in his classic book One Up on Wall Street, focuses on finding growing companies that still trade at reasonable valuations. Rather than chasing the fastest-growing names in the market, Lynch sought out businesses with sustainable earnings growth — typically between 15% and 30% per year — that were also financially healthy and not overly expensive. The idea is to build a long-term portfolio of companies whose earnings power will eventually be reflected in their share prices, without paying a premium upfront that eats into future returns.
AZZ INC (NYSE:AZZ) is a company that fits this framework quite well. AZZ provides hot-dip galvanizing and coil coating solutions primarily for the North American steel fabrication and construction industries. Its business is not glamorous, but it is essential — exactly the kind of "boring" operation Lynch appreciated, where steady demand and recurring service revenue can compound over time.
How AZZ Meets the Lynch Criteria
The screen that identified AZZ is built directly on Lynch's investment rules. Let's look at how AZZ measures up against those core filters:
EPS 5-Year Growth (23.90%): Lynch required earnings growth between 15% and 30% annually over the past five years. AZZ's EPS growth of 23.90% sits comfortably within this range — fast enough to indicate a growing business, but not so fast that it becomes unsustainable or speculative.
PEG Ratio (0.98): A PEG ratio below 1.0 is Lynch's key valuation check. It compares the P/E ratio to the earnings growth rate. AZZ’s PEG of 0.98 means the stock is priced roughly in line with its earnings growth, which is attractive for a growth-at-a-reasonable-price investor. It also suggests that the market has not yet fully priced in the company's historical growth trajectory.
Return on Equity (23.73%): ROE above 15% is a sign of healthy profitability and efficient use of shareholder capital. AZZ’s ROE of 23.73% comfortably clears this bar and is better than 80% of its peers in the Building Products industry.
Debt/Equity (0.37): Lynch was conservative with debt, preferring companies that are equity-funded rather than debt-laden. AZZ's D/E ratio of 0.37 is well below the 0.6 maximum and even below Lynch's own preferred threshold of 0.25.
Current Ratio (1.70): A current ratio above 1.0 ensures the company can cover its short-term liabilities with its short-term assets. AZZ’s ratio of 1.70 indicates solid liquidity without being excessive.
Each of these metrics reinforces why AZZ is a candidate for Lynch-style investors. The combination of double-digit earnings growth, a reasonable valuation, strong profitability, and a healthy balance sheet mirrors the exact profile Lynch looked for when constructing his portfolio.
A High-Level Look at the Fundamental Report
Digging deeper into the fundamental analysis, AZZ receives an overall score of 6 out of 10, with standout strength in profitability. The company's profit margin of 19.23% outperforms nearly 98% of its industry peers, and its operating margin has been steadily improving. Return on assets and return on equity are both well above industry averages, signaling efficient capital use.
On the health front, AZZ's Altman-Z score of 4.69 indicates a very low risk of bankruptcy. Its debt-to-free-cash-flow ratio of 1.11 means the company could theoretically pay off all its debt in just over a year — a strong sign of solvency. The quick ratio of 1.21 also suggests the company can handle short-term obligations without relying on inventory sales.
Valuation is a mixed bag. The P/E ratio of 23.39 is slightly above the industry average, but the price-to-free-cash-flow multiple is significantly cheaper than 87.5% of peers. The PEG ratio, as noted, remains below 1.0. Growth is moderating, with expected EPS growth of 6% annually in the coming years, down from the rapid 23.90% pace of the past five years. This deceleration is not unusual for a maturing industrial business, but it does mean investors should monitor future catalysts closely.
Finding More Opportunities Like AZZ
AZZ is just one example of the kind of company that can emerge from a disciplined Peter Lynch screen. For investors who want to explore other stocks that meet the same criteria — sustainable growth, reasonable valuation, strong profitability, and a solid balance sheet — you can run the screen yourself and adjust the parameters to fit your preferences. Click here to view the full results of the Peter Lynch stock screener and find additional candidates for your long-term portfolio.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always conduct your own research before making any investment decisions.
Read full article here »