The past six months have been a windfall for CECO Environmental’s shareholders. The company’s stock price has jumped 106%, hitting $59.85 per share. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is now still a good time to buy CECO? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free for active Edge members.

Why Is CECO a Good Business?

With roots dating back to 1869 and a focus on creating cleaner industrial operations, CECO Environmental (NASDAQ: CECO) provides technology and expertise that helps industrial companies reduce emissions, treat water, and improve energy efficiency across various sectors.

1. Skyrocketing Revenue Shows Strong Momentum

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, CECO Environmental’s 17.4% annualized revenue growth over the last five years was incredible. Its growth beat the average business services company and shows its offerings resonate with customers.

2. Adjusted Operating Margin Rising, Profits Up

Adjusted operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies because it excludes non-recurring expenses, interest on debt, and taxes.

CECO Environmental’s adjusted operating margin rose by 11.4 percentage points over the last five years, as its sales growth gave it immense operating leverage. Its adjusted operating margin for the trailing 12 months was 14%.

3. New Investments Bear Fruit as ROIC Jumps

A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, CECO Environmental’s ROIC has increased. its rising ROIC is a good sign and could suggest its competitive advantage or profitable growth opportunities are expanding.

Final Judgment

These are just a few reasons CECO Environmental is a high-quality business worth owning, and with the recent surge, the stock trades at 46× forward P/E (or $59.85 per share). Is now the time to buy despite the apparent froth? See for yourself in our comprehensive research report, it’s free for active Edge members .

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