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Stock market crashes are an opportune time to buy. High quality companies, such as Brady Corporation, are impacted by general market panic and sell-off, but the fundamentals of these companies stay the same. In other words, now is the time to buy strong, well-proven stocks at an attractive discount.
Brady Corporation manufactures and supplies identification solutions (IDS) and workplace safety (WPS) products to identify and protect premises, products, and people in the United States and internationally. Established in 1914, and led by CEO J. Nauman, the company now has 6.20k employees and with the market cap of US$2.4b, it falls under the mid-cap category. Size matters. The bigger the company is, the more well-resourced it is. The more money it produces from its operations which means it is less reliant on external funding. When times are bad in the market, being self-sufficient is extremely important as you can continue to operate at your own pace. Therefore, large cap companies are a great bet to invest in when you’re heading to the bottom of the cycle.
Currently Brady has US$50m on its balance sheet, which requires regular interest payments. This requires the business to have enough cash to meet these upcoming interest expenses. With interest income higher than interest payments, meeting these short-term debt obligations isn’t a problem for Brady. Furthermore, its operating cash flows amply covers its total debt by over 2x, much higher than the safe minimum of 0.2x. Its cash and short-term investment is also sufficient to cover other upcoming liabilities, which means BRC is financially robust in the face of a volatile market.
BRC’s profit growth over the previous five years has been positive, with an average annual rate of 59%, beating the industry growth rate of 16%. It has also returned an ROE of 16% recently, above the industry return of 13%. This continuous market outperformance demonstrates a strong track record of delivering robust returns over many years, raising my confidence in Brady as a long-term hold.
Next Steps:Brady makes for a robust long-term investment based on its scale, financial health and track record. Remember, in bear markets, sell-offs can be unjustified. Ask yourself, has anything really changed with Brady? If not, then why not scoop it up at a discount? Lining your portfolio with a few well-established companies can reduce your risk and help you scale your wealth in the long run. One thing you should remember though, is to do your homework. Do your own research, come up with your point of view. Below is a list I’ve put together of other things you should consider before you buy:
- Future Outlook: What are well-informed industry analysts predicting for BRC’s future growth? Take a look at our free research report of analyst consensus for BRC’s outlook.
- Valuation: What is BRC worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether BRC is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.