Hexcel’s 22% return over the past six months has outpaced the S&P 500 by 14.2%, and its stock price has climbed to $98.48 per share. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Following the strength, is HXL a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.
Why Does Hexcel Spark Debate?
Founded shortly after World War II by a group of engineers from UC Berkley, Hexcel (NYSE: HXL) manufactures lightweight composite materials primarily for the aerospace and defense sectors.
Two Things to Like:
1. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Hexcel’s full-year EPS flipped from negative to positive over the last five years. This is a good sign and shows it’s at an inflection point.
2. Increasing Free Cash Flow Margin Juices Financials
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Hexcel’s margin expanded by 4.2 percentage points over the last five years. This shows the company is heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Hexcel’s free cash flow margin for the trailing 12 months was 10.6%.
One Reason to Be Careful:
Lackluster Revenue Growth
We at StockStory place the most emphasis on long-term growth, but within industrials, a stretched historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Hexcel’s recent performance shows its demand has slowed as its annualized revenue growth of 3.7% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
Final Judgment
Hexcel’s positive characteristics outweigh the negatives, and with its shares beating the market recently, the stock trades at 42.4× forward P/E (or $98.48 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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