nVent is an under-the-radar way to play the electrification megatrend.
Undervalued and outperforming
Lee Samaha (nVent Electric). The electrical connection and protection product manufacturer's fourth-quarter earnings report was a little short of outstanding. However, organic sales rose 24% in the quarter, leading to adjusted earnings growth of 16% compared to the same quarter of 2020. In addition, organic sales rose 18% on a full-year basis, with adjusted earnings up 31%.
Moreover, management expects organic sales growth of 6%-9% in 2022. It's an impressive performance driven by a megatrend, electrification, that's set for long-term growth.
nVent's products include electrical enclosures, electrical and fastening solutions, and thermal management products. They are essential products necessary for customers to ensure safety and regulatory compliance. As such, nVent's products are broadly used across several industries across the industrial sector. In addition, commercial and residential buildings are a key end market, as is infrastructure, including 5G, renewables, data centers, and electric vehicle charging solutions.
If you are going to have renewable energy and electric vehicles, you will need new transmission and distribution networks and storage. Meanwhile, the growth of so-called smart buildings and smart infrastructure implies electrical connectivity, as does factory automation.
Consequently, nVent has exciting long-term growth prospects, and the good news is it trades at a valuation discount to its peers and looks like a great value on an absolute basis.
