RPM International Inc. (RPM) is a leading manufacturer and seller of chemicals for industrial, specialty, and consumer markets. The company offers a wide range of products, including waterproofing, coatings, traditional roofing systems, sealants, air barriers, tapes, and foams. For the first quarter of 2025, the company reported solid financial results. Its EPS of $1.84 beat the analysts’ estimate of $1.74.

Recently, the company strengthened its operational position and offerings capacity with the acquisition of TMP Convert SAS (TMPC). The acquisition has expanded its current capabilities along with opening new avenues for the future.

Following its continued implementation of MAP 2025 operational improvement initiatives, RPM generated record-adjusted EBIT for the 11th consecutive quarter. Also, it is leveraging its portfolio of products, services, and entrepreneurial culture to capture growth opportunities. Further, with MAP 2025 and structural improvements to working capital, the company maintained its strong cash flow generation trend.

Such well-thought techniques and strategies have resulted in the company’s solid profitability and reliable cash flow over the quarter. RPM International is continually navigating its operations to growth, as is reflected in the organic growth in its Construction Products and Performance Coatings groups and expanded adjusted EBIT margins in its Specialty Products and Consumer groups.

Further, looking ahead to the full-year fiscal 2025, the company expects consolidated sales growth in the low-single-digit percentage range compared to the prior year. It also expects consolidated adjusted EBIT growth in the mid-single- to low-double-digit percentage range compared to the preceding year.

Shares of RPM have gained 12.3% over the past six months and 8.7% over the past year to close its last trading session at $119.26. However, the stock has slumped 13.4% over the past month, reflecting volatility in the recent sessions.

Let’s look at factors that could influence RPM’s performance in the upcoming months.

Positive Recent Developments

On October 31, RPM acquired TMP Convert SAS (TMPC), a leading manufacturer of outdoor design and landscape products. Post-acquisition, TMPC has become a part of RPM’s Fibergrate Structures business within its Performance Coatings Group.

The strategic acquisition strongly fits RPM’s Bison business from a product perspective and geographically. It will allow the company to expand its offering of durable, easy-to-install, and low-maintenance products for decking and landscaping solutions in markets worldwide.

TMPC’s solutions, like adjustable and fixed pedestals and accessories for flooring and roofing applications, complement Fibergrate’s Bison business, which produces composite adjustable pedestals and decking solutions.

Solid Financials

For the first quarter that ended August 31, 2024, RPM reported net sales of $1.97 billion. Its gross profit increased 1% from the prior quarter’s quarter to $836.67 million. The company’s income before income taxes grew 7.9% from the year-ago value to $290.45 million.

Furthermore, net income attributable to RPM stockholders and adjusted EPS came in at $227.69 million and $1.84, indicating growth of 13.2% and 12.2% from the prior year’s quarter, respectively. RPM’s adjusted EBIT was $328.34 million for the quarter, up 6.3% year-over-year.

Also, as of August 31, 2024, the company’s cash and cash equivalents and total current assets stood at $231.55 million and $2.90 billion.

Impressive Historical Growth

RPM’s revenue grew at a CAGR of 5.8% over the past three years, while its EBITDA improved at a CAGR of 9.6%. Its EBIT increased at a CAGR of 10.5% over the same period, while the company’s net income and EPS grew at respective CAGRs of 10.4% and 10.7% over the same time frame.

In addition, the company’s total assets and levered free cash flow increased at CAGRs of 2.6% and 50.8% over the same timeframe, respectively.

Favorable Analyst Estimates

Analysts expect RPM’s revenue for the third quarter (ending February 2025) to come in at $1.55 billion, indicating an increase of 1.8% year-over-year. The consensus EPS estimate of $0.62 for the same period reflects an 18.4% year-over-year improvement. Moreover, the company has topped the consensus EPS estimates in three of the trailing four quarters.

For the fiscal year (ending May 2025), the company’s revenue and EPS are anticipated to grow marginally and 12.3% year-over-year to $7.38 billion and $5.55, respectively. In addition, Street expects its revenue and EPS for the fiscal year (ending May 2026) to grow 3.7% and 11.4% from the prior year to $7.65 billion and $6.18, respectively.

High Profitability

RPM’s trailing-12-month gross profit margin of 41.45% is 41.9% higher than the 29.20% industry average. Its trailing-12-month net income margin of 8.43% is considerably higher than the industry average of 5%. Likewise, the stock’s trailing-12-month EBIT margin of 12.35% is 15.1% higher than the industry average of 10.73%.

Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 24.84%, 11.16%, and 9.25% are higher than the 5.77%, 4.78%, and 2.40% industry average, respectively.

Elevated Valuation

In terms of forward non-GAAP P/E, RPM is currently trading at 21.51x, 37.7% higher than the industry average of 15.62x. Also, the stock’s forward EV/Sales and Price/Sales of 2.37x and 2.08x are considerably higher than the industry average of 1.62x and 1.32x, respectively.

Additionally, the stock’s forward EV/EBITDA and Price/Cash Flow of 14.49x and 18.49x are 75.8% and 114.9% higher than the industry averages of 8.24x and 8.61x, respectively.

POWR Ratings Reflect Uncertainty

RPM’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, translating to a Neutral in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. RPM has an A grade for Quality, in sync with its higher profitability relative to its peers.

However, the stock’s elevated valuation has resulted in a C grade for Value.

RPM is ranked #38 among the 81 stocks in the B-rated Chemicals industry.

Beyond what I have stated above, we have also given RPM grades for Stability, Growth, Sentiment, and Momentum. Get access to all the RPM ratings here.

Bottom Line

RPM reported solid financial results in the last financial quarter, fueled by strong EBIT margins and organic growth. Also, the company’s long-term prospects appear promising, driven by its operational expansion through acquisition and strategic initiatives.

Amid this, aspects like high volatility and market and industry risks could pose a hindrance in the company’s operations.

Given RPM’s elevated valuation and mixed growth outlook, it could be wise to wait for a better entry point in this stock.

Stocks to Consider Instead of RPM International Inc. (RPM)

Given its near-term uncertain prospects, the odds of RPM outperforming in the weeks and months ahead are compromised. However, there are many industry peers with much more impressive POWR Ratings. So, consider these A (Strong Buy) or B (Buy) stocks from the B-rated Chemicals industry instead:

Evonik Industries AG ADR (EVKIY)

Sisecam Resources LP (SIRE)

Nitto Denko Corporation (NDEKY)

For exploring more A and B-rated chemicals stocks, click here.

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RPM shares were trading at $121.10 per share on Friday afternoon, up $1.84 (+1.54%). Year-to-date, RPM has declined -1.59%, versus a 0.94% rise in the benchmark S&P 500 index during the same period.

About the Author: Rjkumari Saxena

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions. More...

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