FLS: FLS: Seeing huge demand due to global growth

Buy: FLS, Target Price: $150, Time Frame: 6 months This name is one of the most boring companies on the street in terms of what they do. After all, they make pumps and valves. But, this company is right at the heart of global growth and their share price is evidence of that. Every single price target I set for this name gets blasted through. This stock really is unbelievable. Every earnings report they beat and guide higher. Its simply caught right in the middle of global growth and you can't stop this name. If you want a consistent performer despite a slowing US economy, then all you have to do is glance at a 1 year chart of Flowserve. This thing is in a steady uptrend from $60 to now over $100 a share. Every single dip in this name has been an excellent buying opportunity. Flowserve (FLS) has basically just been dominating over the past year. It's up over 85% over the past year, and 8% in the past 3 months alone. This is a momentum play for sure, but there are strong fundamentals and buying driving this name higher every month. FLS manufactures flow control systems such as valves, seals, and pumps. It operates over numerous industries and also has lots of aftermarket equipment services such as repair, retrofitting, installation, and advanced diagnostics. They operate with a pump division, control division, and solutions division. And, most importantly, this company is firing on all cylinders and seeing strong demand worldwide for its products. Fundamentals: FLS has a market cap of about 7 billion (constantly expanding) and has a trailing PE of 27 and a forward PE of 17. Couple this information with their PEG ratio of 1.8 and FLS is seemingly primed for future growth. Their PEG definitely does not indicate it, but the earnings reports sure do. PEG says this company is tapped out in terms of growth yet it still keeps beating and the stock keeps heading higher. Where FLS really shines are its price to sales ratio. Its price to sales ratio comes in at a very low 1.89. Any PS ratio below 5 typically deems an equity as undervalued. And, with such a low PS ratio, FLS is definitely undervalued here. Turning to margins and returns, we see that FLS has strong operating margins at 10.4% in an industry where margins are usually stretched. And, their margins have been increasing on a quarterly basis. Not to mention, FLS is able to achieve a return on equity of 22.11% in such an environment, another number that has been increasing on a quarterly basis. So, given the industry they are in, these numbers are pretty strong. Lastly, we see that FLS is growing effectively with a 19.3% gain in quarterly revenue growth. And, more impressively, they have had a 115% gain in quarterly earnings growth. These numbers are very strong and are probably a big reason as to why investors are piling into this name. The only negative to consider here fundamentally would be their debt to equity. They currently have around $370 million in cash, but have $557 million in debt. So, we'll have to watch closely to see how they manage this debt. A positive though, is that they have increased their cash position over the months as well as reduced their debt amount: both very positive signs. Look for them to continue to raise cash and pay off debt all in one swing. The main thing with Flowserve is that they are a boring company that find themselves right in the middle of strong demand. Recent Developments: Qatar Petroleum and Shell are developing an integrated pearl gas to liquid facility in Qatar and will utilize nearly 500 Flowserve products. So, this is good news that such a large project has entrusted FLS with their flow control needs. Look for even more contracts/orders to be popping up here as growth continues to explode in the middle east and Asia. FLS is already one of the leading providers in control products relating to fluid motion. They operate in 55 countries and are one of the first companies people turn to when they have flow control needs. Suffice it to say that FLS is dominantly positioned in the market they service. Next, taking a quick look over the institutional opinion on FLS is pretty bullish. Analyst sentiment reveals that RBC Capital recently upgraded FLS to sector outperform from sector perform. Also, both BMO Capital Markets and Bear Stearns rate FLS a 4 star name, which is encouraging. The analysts will look for FLS to outperform the market over the next 6 months with less than average risk. Lastly, taking a look at institutional ownership reveals that lots of big names have confidence in FLS and they are probably one of the main reasons FLS has trended so highly this year. They undoubtedly have been buying up big stakes in FLS. Fidelity, Alliance Bernstein, Barclays, Vanguard, and State Street all have large stakes in FLS. Not to mention, big successful hedge fund D.E. Shaw & Co LP also has quite a large stake in FLS. This should instill even more confidence into potential investments, as D.E. Shaw has been known to produce great returns over the years. FLS is the definition of global growth. After all, they make pumps and valves. And, if no one needs those, this company would not be trading where it is today. They are obviously seeing strong demand as global growth continues. If you want a solid performer then look no further. A 1 year chart of FLS is all you need to see. Buy on the dips. FLS really does capitalize on the global growth story just because they operate in 55 countries. This diversity and international exposure is great, especially at a time when the US market is full of uncertainty and negativity. Look for the global growth to continue, particularly in Asia and the middle east, as you should see the announcement of even more orders for Flowserve's products. This should provide a great near-term catalyst. But, as we've seen over the past year, FLS doesn't even really need catalysts. Their stock has been trending higher all along with a great chart. Buy: FLS, Target Price: $150, Time Frame: 6 months Follow my stock analysis and additional market commentary at http://madhatterstocks.blogspot.com/