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Enpro Inc. 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Enpro Inc.

Filing date:

02/21/2025

TLDR:

Enpro Inc.’s 10-K filing for FY 2024 shows a slight decrease in sales but a significant increase in income from continuing operations. The Sealing Technologies segment performed well, while Advanced Surface Technologies declined.

ELI5:

Enpro, a company that makes industrial parts, had a mixed year. They sold slightly less overall, but made more profit. One part of their business (Sealing Technologies) did well, while another (Advanced Surface Technologies) struggled.

Accession #:

0001164863-25-000009

Published on

Analyst Summary

  • Total sales decreased slightly by 1.0% from 2023 to 2024.
  • Income from continuing operations attributable to Enpro Inc. increased significantly from $10.8 million in 2023 to $72.9 million in 2024.
  • Sealing Technologies Adjusted Segment EBITDA increased by 16.5%, with margin improvement from 29.2% to 32.6%.
  • Advanced Surface Technologies Adjusted Segment EBITDA decreased by 19.6%, with margin decline from 23.8% to 21.2%.
  • Cash and cash equivalents decreased from $369.8 million in 2023 to $236.3 million in 2024, primarily due to the AMI acquisition.
  • Order backlog increased slightly from $225.4 million to $240.6 million, indicating future demand.
  • Gross Profit Margin increased by 5.23% to 42.41%.
  • Operating Profit Margin increased by 87.17% to 13.57%.
  • Net Profit Margin increased by 232.54% to 6.95%.
  • Basic EPS increased by 228.30% to $3.48.
  • Diluted EPS increased by 228.57% to $3.45.

Opportunities and Risks

  • Cyclical Markets: Exposure to cyclical industries, particularly semiconductor manufacturing, poses a risk.
  • Customer Concentration: Advanced Surface Technologies relies heavily on a small number of customers.
  • Competition: Intense competition could impact pricing and market share.
  • Raw Material Costs: Increased raw material costs and supply chain disruptions could affect profitability.
  • Cybersecurity: Information technology disruptions, including cybersecurity attacks, could have a material adverse effect.
  • PFAS Regulations: Evolving regulatory restrictions on per- and polyfluoroalkyl substances (PFAS) may restrict the manufacture or use of fluoropolymers, including PTFE, which are currently included as critical components in certain of our products.
  • Acquisitions: Continued strategic acquisitions can expand capabilities and market reach.
  • Aftermarket Revenue: Strong aftermarket revenue in Sealing Technologies provides stability.
  • Innovation: Ongoing research and development can lead to new products and solutions.
  • Sustainability: Focus on clean energy transition and environmental protection aligns with market trends.

Potential Implications

Stock Price

  • A P/E ratio of 58.05 is relatively high, suggesting that the stock may be overvalued or that investors are expecting high growth in the future.
  • A P/B ratio of 2.94 suggests that the market values the company at nearly three times its book value.
  • A P/S ratio of 4.01 suggests that investors are paying $4.01 for every dollar of the company’s sales.
  • An EV/EBITDA ratio of 17.88 is relatively high, suggesting that the company may be overvalued.

Enpro Inc. (NPO) 10-K Filing Analysis – FY 2024

Executive Summary

This report analyzes Enpro Inc.’s 10-K filing for the fiscal year ended December 31, 2024. Key findings include a slight decrease in overall sales, but a significant increase in income from continuing operations. The Sealing Technologies segment showed strong performance, while Advanced Surface Technologies experienced a decline. The acquisition of Advanced Micro Instruments (AMI) is a notable event. Overall, the company appears to be financially sound, but the reliance on a few key customers in the Advanced Surface Technologies segment and cyclical market conditions remain key risks.

Company Overview

Enpro Inc. (NPO) is an industrial technology company focused on critical applications across diverse markets. It operates through two segments: Sealing Technologies and Advanced Surface Technologies. Recent strategic initiatives include acquisitions (AMI, Alluxa, LeanTeq) and dispositions (GGB, GPT) to focus on high-margin, recurring revenue businesses.

Detailed Analysis

Revenue Analysis

  • Total sales decreased slightly by 1.0% from 2023 to 2024.
  • Sealing Technologies sales increased by 4.4%, driven by acquisitions and strength in aerospace and nuclear markets.
  • Advanced Surface Technologies sales decreased by 9.7%, primarily due to weakness in semiconductor capital equipment spending.
  • Geographic sales: US sales decreased, while Europe and Asia Pacific increased slightly.

Profitability Analysis

  • Income from continuing operations attributable to Enpro Inc. increased significantly from $10.8 million in 2023 to $72.9 million in 2024.
  • Sealing Technologies Adjusted Segment EBITDA increased by 16.5%, with margin improvement from 29.2% to 32.6%.
  • Advanced Surface Technologies Adjusted Segment EBITDA decreased by 19.6%, with margin decline from 23.8% to 21.2%.

Balance Sheet Analysis

  • Cash and cash equivalents decreased from $369.8 million in 2023 to $236.3 million in 2024, primarily due to the AMI acquisition.
  • Goodwill increased from $808.4 million to $896.2 million, reflecting the AMI acquisition.
  • Other intangible assets increased from $733.5 million to $790.3 million, also related to the AMI acquisition.
  • Long-term debt decreased slightly from $638.7 million to $624.1 million.

Cash Flow Analysis

  • Cash from operating activities decreased from $208.4 million in 2023 to $162.9 million in 2024.
  • Investing activities used $241.5 million in 2024, primarily for the AMI acquisition.
  • Financing activities used $50.5 million in 2024, mainly for the acquisition of non-controlling interests and dividend payments.

Management’s Discussion and Analysis (MD&A) Insights

  • Management highlights strategic initiatives, including acquisitions and dispositions, to focus on high-growth markets.
  • Management acknowledges cyclical market conditions and dependence on key customers as risks.
  • Management emphasizes safety, employee development, and community involvement.

Risk Assessment

  • Cyclical Markets: Exposure to cyclical industries, particularly semiconductor manufacturing, poses a risk.
  • Customer Concentration: Advanced Surface Technologies relies heavily on a small number of customers.
  • Competition: Intense competition could impact pricing and market share.
  • Raw Material Costs: Increased raw material costs and supply chain disruptions could affect profitability.
  • Cybersecurity: Information technology disruptions, including cybersecurity attacks, could have a material adverse effect.
  • PFAS Regulations: Evolving regulatory restrictions on per- and polyfluoroalkyl substances (PFAS) may restrict the manufacture or use of fluoropolymers, including PTFE, which are currently included as critical components in certain of our products.

Opportunities

  • Acquisitions: Continued strategic acquisitions can expand capabilities and market reach.
  • Aftermarket Revenue: Strong aftermarket revenue in Sealing Technologies provides stability.
  • Innovation: Ongoing research and development can lead to new products and solutions.
  • Sustainability: Focus on clean energy transition and environmental protection aligns with market trends.

Uncommon Metrics

  • Backlog: Order backlog increased slightly from $225.4 million to $240.6 million, indicating future demand.
  • Employee Retention: Aggregate retention rates are at or above market level, reflecting a positive work environment.

Red Flags

  • The goodwill impairment charges in prior years related to the Alluxa reporting unit.
  • The increase in the valuation reserve on a long-term promissory note received in partial consideration for the sale of a non-strategic business in 2020.

Conclusion & Actionable Insights

Enpro Inc. demonstrates a mixed performance in FY 2024. While the Sealing Technologies segment shows strength and the company is profitable, the decline in Advanced Surface Technologies and reliance on key customers warrant attention. The acquisition of AMI presents an opportunity for growth, but integration risks should be carefully managed.

Overall Assessment: Hold. While the company is fundamentally sound, the risks associated with customer concentration and cyclical markets suggest a cautious approach.

Recommendations:

  • Diversify customer base in Advanced Surface Technologies to reduce reliance on key accounts.
  • Continue to invest in R&D to maintain a competitive edge and develop innovative solutions.
  • Monitor and mitigate risks related to raw material costs and supply chain disruptions.
  • Closely monitor the integration of AMI and ensure realization of expected synergies.
  • Continue to enhance cybersecurity measures to protect against potential threats.

Financial Ratio and Metric Analysis

Profitability

Gross Profit Margin

  • Ratio/Metric: Gross Profit / Net Sales = $444.8 / $1,048.7 = 42.41%
  • Trend: Previous year Gross Profit Margin = $426.8 / $1,059.3 = 40.3%. Percentage change = (42.41% – 40.3%)/40.3% = 5.23% increase
  • Industry: The industry average gross profit margin for industrial manufacturers is around 30-40%. Enpro’s margin of 42.41% is above average, indicating strong cost management and pricing strategies.

Operating Profit Margin

  • Ratio/Metric: Operating Income / Net Sales = $142.3 / $1,048.7 = 13.57%
  • Trend: Previous year Operating Profit Margin = $76.8 / $1,059.3 = 7.25%. Percentage change = (13.57% – 7.25%)/7.25% = 87.17% increase
  • Industry: The industry average operating profit margin for industrial manufacturers is around 8-12%. Enpro’s margin of 13.57% is above average, indicating efficient operations.

Net Profit Margin

  • Ratio/Metric: Net Income Attributable to Enpro Inc. / Net Sales = $72.9 / $1,048.7 = 6.95%
  • Trend: Previous year Net Profit Margin = $22.2 / $1,059.3 = 2.09%. Percentage change = (6.95% – 2.09%)/2.09% = 232.54% increase
  • Industry: The industry average net profit margin for industrial manufacturers is around 4-8%. Enpro’s margin of 6.95% is within the average range, indicating good profitability.

Return on Assets (ROA)

  • Ratio/Metric: Net Income Attributable to Enpro Inc. / Total Assets = $72.9 / $2,491.5 = 2.93%
  • Trend: Previous year ROA = $22.2 / $2,499.5 = 0.89%. Percentage change = (2.93% – 0.89%)/0.89% = 229.21% increase
  • Industry: The industry average ROA for industrial manufacturers is around 3-5%. Enpro’s ROA of 2.93% is below average, indicating that the company is not generating enough profit from its assets.

Return on Equity (ROE)

  • Ratio/Metric: Net Income Attributable to Enpro Inc. / Total Shareholders’ Equity = $72.9 / $1,428.6 = 5.10%
  • Trend: Previous year ROE = $22.2 / $1,409.7 = 1.57%. Percentage change = (5.10% – 1.57%)/1.57% = 224.84% increase
  • Industry: The industry average ROE for industrial manufacturers is around 10-15%. Enpro’s ROE of 5.10% is below average, indicating that the company is not generating enough profit from its equity.

Earnings Per Share (EPS) – Basic and Diluted

  • Ratio/Metric:
    • Basic EPS: $3.48
    • Diluted EPS: $3.45
  • Trend:
    • Previous year Basic EPS: $1.06. Percentage change = (3.48 – 1.06)/1.06 = 228.30% increase
    • Previous year Diluted EPS: $1.05. Percentage change = (3.45 – 1.05)/1.05 = 228.57% increase
  • Industry: EPS varies widely by company and industry. A positive EPS is generally good, and the trend is strongly positive.

Liquidity

Current Ratio

  • Ratio/Metric: Current Assets / Current Liabilities = $512.3 / $198.0 = 2.59
  • Trend: Previous year Current Ratio = $650.3 / $196.4 = 3.31. Percentage change = (2.59 – 3.31)/3.31 = -21.75% decrease
  • Industry: A current ratio of 2.59 is generally considered healthy, indicating a good ability to meet short-term obligations.

Quick Ratio (Acid-Test Ratio)

  • Ratio/Metric: (Current Assets – Inventories) / Current Liabilities = ($512.3 – $138.8) / $198.0 = 1.89
  • Trend: Previous year Quick Ratio = ($650.3 – $142.6) / $196.4 = 2.58. Percentage change = (1.89 – 2.58)/2.58 = -26.74% decrease
  • Industry: A quick ratio of 1.89 is generally considered healthy, indicating a good ability to meet short-term obligations without relying on the sale of inventories.

Cash Ratio

  • Ratio/Metric: Cash and Cash Equivalents / Current Liabilities = $236.3 / $198.0 = 1.19
  • Trend: Previous year Cash Ratio = $369.8 / $196.4 = 1.88. Percentage change = (1.19 – 1.88)/1.88 = -36.70% decrease
  • Industry: A cash ratio of 1.19 indicates a strong ability to meet short-term obligations with cash and cash equivalents.

Solvency/Leverage

Debt-to-Equity Ratio

  • Ratio/Metric: Total Liabilities / Total Shareholders’ Equity = $1,062.9 / $1,428.6 = 0.74
  • Trend: Previous year Debt-to-Equity Ratio = $1,071.9 / $1,409.7 = 0.76. Percentage change = (0.74 – 0.76)/0.76 = -2.63% decrease
  • Industry: A debt-to-equity ratio of 0.74 is generally considered healthy, indicating a reasonable balance between debt and equity financing.

Debt-to-Assets Ratio

  • Ratio/Metric: Total Liabilities / Total Assets = $1,062.9 / $2,491.5 = 0.43
  • Trend: Previous year Debt-to-Assets Ratio = $1,071.9 / $2,499.5 = 0.43. Percentage change = (0.43 – 0.43)/0.43 = 0%
  • Industry: A debt-to-assets ratio of 0.43 indicates that 43% of the company’s assets are financed by debt, which is a moderate level of leverage.

Interest Coverage Ratio (Times Interest Earned)

  • Ratio/Metric: Operating Income / Interest Expense = $142.3 / $40.9 = 3.48
  • Trend: Previous year Interest Coverage Ratio = $76.8 / $45.0 = 1.71. Percentage change = (3.48 – 1.71)/1.71 = 103.51% increase
  • Industry: An interest coverage ratio of 3.48 indicates that the company can comfortably cover its interest expenses with its operating income.

Activity/Efficiency

Inventory Turnover

  • Ratio/Metric: Cost of Sales / Average Inventory = $603.9 / (($138.8 + $142.6) / 2) = 4.29
  • Trend: Previous year Inventory Turnover = $632.5 / (($142.6 + $148.0)/2) = 4.35. Percentage change = (4.29 – 4.35)/4.35 = -1.38% decrease
  • Industry: An inventory turnover of 4.29 indicates that the company is selling and replenishing its inventory 4.29 times a year.

Days Sales Outstanding (DSO)

  • Ratio/Metric: (Accounts Receivable / Net Sales) * 365 = ($115.9 / $1,048.7) * 365 = 40.31 days
  • Trend: Previous year DSO = ($116.7 / $1,059.3) * 365 = 40.15 days. Percentage change = (40.31 – 40.15)/40.15 = 0.40% increase
  • Industry: A DSO of 40.31 days indicates the average number of days that a company takes to collect revenue after a sale.

Days Payable Outstanding (DPO)

  • Ratio/Metric: (Accounts Payable / Cost of Sales) * 365 = ($66.0 / $603.9) * 365 = 39.84 days
  • Trend: Previous year DPO = ($68.7 / $632.5) * 365 = 39.64 days. Percentage change = (39.84 – 39.64)/39.64 = 0.50% increase
  • Industry: A DPO of 39.84 days indicates the average number of days that a company takes to pay its suppliers.

Asset Turnover

  • Ratio/Metric: Net Sales / Total Assets = $1,048.7 / $2,491.5 = 0.42
  • Trend: Previous year Asset Turnover = $1,059.3 / $2,499.5 = 0.42. Percentage change = (0.42 – 0.42)/0.42 = 0%
  • Industry: An asset turnover of 0.42 indicates that the company is generating $0.42 in sales for every $1 of assets.

Valuation

Price-to-Earnings Ratio (P/E)

  • Ratio/Metric: Stock Price / EPS = $200.29 / $3.45 = 58.05
  • Trend: To determine the trend, we would need the P/E ratio from the previous comparable period, which is not provided in the filing.
  • Industry: A P/E ratio of 58.05 is relatively high, suggesting that the stock may be overvalued or that investors are expecting high growth in the future.

Price-to-Book Ratio (P/B)

  • Ratio/Metric: Market Cap / Book Value of Equity = (20.98M * $200.29) / $1,428.6M = 2.94
  • Trend: To determine the trend, we would need the P/B ratio from the previous comparable period, which is not provided in the filing.
  • Industry: A P/B ratio of 2.94 suggests that the market values the company at nearly three times its book value.

Price-to-Sales Ratio (P/S)

  • Ratio/Metric: Market Cap / Net Sales = (20.98M * $200.29) / $1,048.7M = 4.01
  • Trend: To determine the trend, we would need the P/S ratio from the previous comparable period, which is not provided in the filing.
  • Industry: A P/S ratio of 4.01 suggests that investors are paying $4.01 for every dollar of the company’s sales.

Enterprise Value to EBITDA (EV/EBITDA)

  • Ratio/Metric: (Market Cap + Total Debt – Cash) / EBITDA = ((20.98M * $200.29) + $640.1M – $236.3M) / $254.8M = 17.88
  • Trend: To determine the trend, we would need the EV/EBITDA ratio from the previous comparable period, which is not provided in the filing.
  • Industry: An EV/EBITDA ratio of 17.88 is relatively high, suggesting that the company may be overvalued.

Growth Rates

Revenue Growth

  • Ratio/Metric: (Current Revenue – Previous Revenue) / Previous Revenue = ($1,048.7 – $1,059.3) / $1,059.3 = -1.00%
  • Trend: Revenue decreased by 1.00%
  • Industry: The revenue growth rate varies widely by industry and company. A negative growth rate is generally concerning.

Net Income Growth

  • Ratio/Metric: (Current Net Income – Previous Net Income) / Previous Net Income = ($72.9 – $22.2) / $22.2 = 228.38%
  • Trend: Net income increased by 228.38%
  • Industry: The net income growth rate varies widely by industry and company. A positive growth rate is generally good.

EPS Growth

  • Ratio/Metric: (Current EPS – Previous EPS) / Previous EPS = ($3.45 – $1.05) / $1.05 = 228.57%
  • Trend: EPS increased by 228.57%
  • Industry: The EPS growth rate varies widely by industry and company. A positive growth rate is generally good.

Other Relevant Metrics

Adjusted Segment EBITDA

  • Metric: Adjusted Segment EBITDA increased from $287.8 million in 2023 to $300.8 million in 2024.
  • Significance: This metric reflects the profitability of the company’s core operations, excluding certain non-cash and non-recurring items. The increase indicates improved operational performance.

Sales by Segment

  • Metric:
    • Sealing Technologies: Sales increased from $658.4 million in 2023 to $687.2 million in 2024.
    • Advanced Surface Technologies: Sales decreased from $401.2 million in 2023 to $362.2 million in 2024.
  • Significance: This breakdown provides insights into the performance of each business segment. The increase in Sealing Technologies sales is a positive sign, while the decrease in Advanced Surface Technologies sales warrants further investigation.

Commentary

Enpro Inc. demonstrated a mixed financial performance in 2024. While revenue experienced a slight decrease, the company achieved significant improvements in profitability metrics such as operating profit margin, net profit margin, ROA, ROE, and EPS. The increase in Adjusted Segment EBITDA suggests improved operational efficiency. However, the decline in sales for the Advanced Surface Technologies segment and the relatively high valuation ratios warrant further scrutiny.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️