What a fantastic six months it’s been for Regal Rexnord. Shares of the company have skyrocketed 42.5%, hitting $219.50. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is there a buying opportunity in Regal Rexnord, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Regal Rexnord Not Exciting?
We’re happy investors have made money, but we’re cautious about Regal Rexnord. Here are three reasons why there are better opportunities than RRX, plus one stock we’d rather own.
1. Core Business Falling Behind as Demand Plateaus
We can better understand Engineered Components and Systems companies by analyzing their organic revenue. This metric gives visibility into Regal Rexnord’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Regal Rexnord failed to grow its organic revenue. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Regal Rexnord might have to lean into acquisitions to accelerate growth, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). 
2. Recent EPS Growth Below Our Standards
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Regal Rexnord’s EPS grew at an unimpressive 4% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 4.5% annualized revenue declines and tells us management adapted its cost structure in response to a challenging demand environment.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Regal Rexnord historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 4.1%, lower than the typical cost of capital (how much it costs to raise money) for industrials companies.
Final Judgment
Regal Rexnord isn’t a terrible business, but it doesn’t pass our quality test. Following the recent rally, the stock trades at 18.3× forward P/E (or $219.50 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We’re fairly confident there are better stocks to buy right now. Let us point you toward a fast-growing restaurant franchise with an A+ ranch dressing sauce.
Stocks We Would Buy Instead of Regal Rexnord
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
