As PNR Nears its All-Time Highs Again, is it Time to Sell?

Pentair stock growth isn't matching up with company performance

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Pentair PLC (NYSE:PNR) is primarily an American water treatment company. The company operates through its water and electrical businesses, although their main focus is on residential, commercial, industrial, municipal and infrastructure, and agriculture applications. Pentair has approximately 9,750 global employees serving customers in more than 150 countries.

Pentair stock has increased by about 65% year-over-year. Additionally, shares of PNR have grown by 32% year-to-date and are currently trading just within a chip-shot of its July 13 record high of $71.00. The stock saw a sharp bounce off its 100-day moving average late last month, with more immediate support at the 10-day moving average. Pentair stock also has a forward dividend of $0.80 and a dividend yield of 1.14%.

Pentair announced this week that the company will be reporting its second-quarter financial results before market opens on Tuesday, July 27. PNR will also hold a conference call with investors that day. Pentair has clearly outperformed Wall Street's earnings expectations on all four of its most recent earnings reports. For Q2 of 2020, Pentair beat estimates by a margin of $0.10, reporting an earnings per share (EPS) of $0.59. For Q3 of 2020, PNR's EPS increased to $0.70 and beat expectations by a margin of $0.19. For Q4 of 2020, Pentair maintained earnings at $0.70 per share and beat estimates by a margin of $0.07. For Q1 of 2021, Pentair reported an EPS of $0.81 and beat expectations by a margin of $0.19.

From a fundamental point of view, Pentair lacks consistency and stability in many areas. For example, the company’s revenues are down by 36% and the company's net income has decreased by 38% since fiscal 2017. Pentair also carries $1.02 billion in total debt and only $95 million on its balance sheet.

However, PNR's trailing 12-month figures are showing some signs of progress. Pentair’s trailing 12-month revenues have grown by 5% and the trailing 12-month net income has increased by nearly 16% compared to what was reported for 2020. In addition, Pentair stock has a forward price-earnings ratio of 22.03, which is a big improvement from its current price-earnings ratio of 28.40. Unfortunately, though, PNR is still valued very highly for the amount of instabilities it provides.

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