Over the past six months, Lennox’s stock price fell to $539.64. Shareholders have lost 8% of their capital, which is disappointing considering the S&P 500 has climbed by 15.6%. This might have investors contemplating their next move.
Following the pullback, is now an opportune time to buy LII? Find out in our full research report, it’s free.
Why Does LII Stock Spark Debate?
Based in Texas and founded over a century ago, Lennox (NYSE: LII) is a climate control solutions company offering heating, ventilation, air conditioning, and refrigeration (HVACR) goods.
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.
Lennox’s EPS grew at an astounding 20.3% compounded annual growth rate over the last five years, higher than its 8.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
2. Stellar ROIC Showcases Lucrative Growth Opportunities
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).
Lennox’s five-year average ROIC was 52.3%, placing it among the best industrials companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.
One Reason to be Careful:
Lackluster Revenue Growth
Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. Lennox’s recent performance shows its demand has slowed as its annualized revenue growth of 6.2% over the last two years was below its five-year trend. 
Final Judgment
Lennox’s positive characteristics outweigh the negatives. After the recent drawdown, the stock trades at 22.2× forward P/E (or $539.64 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More Than Lennox
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