About Hubbell

Hubbell was founded by who else but Harvey Hubbell in 1888.

Since its seemingly Hubbell (oops, we mean humble) beginnings, the company has grown to be one of the largest, most relied upon electrical companies in the world, as this Shelton, Connecticut-headquartered silent but giant company focuses its time and effort(s) on generating revenue (and more than likely profit, but we shall see) through its variety of brands centered in the lighting, electrical and wiring and power and utilities segments that many depend on every single day, whether they even know it or not.

At first glance, one of the largest positives of Hubbell is that it seems as though the vast majority of the products it sells are rooted in spaces and categories that are regulated and/or required by law for businesses, organizations and other entities to have in order to remain compliant with the relevant safety standards.

Take exit signs and emergency call posts, for example.

We are nearly certain that any sort of business building or complex built for large groups of individuals is required by law to have properly functioning exit signs in the event of any sort of emergency situation and it is quite difficult to step foot on any sort of college campus and not find an emergency call box with a red button one can press and in a matter of seconds have the relevant authorities dispatched.

Upon further review on the company’s website, Hubbell’s products and solutions are widespread in application and category and with that, mixed with the fact that many of its products are likely required by law, we would venture to say that this company is recession resistant to a large degree, which hardly ever hurts.

Wherever you may live, it seems as though there is essentially no chance that Hubbell isn’t somewhere in your domain or at your school or at your place of work or, well, hopefully you get the point by now.

Hubbell is a boring company but we tend to love boring companies, as they, more often than not, have a proven, cash flow generative business model that it is both stable and predictable, not to mention that this company’s share price (NYSE: HUBB) since September 2018 has risen a little over a cool 140% (as of 9/9/2023), as we have seen similar rises in share price in other seasoned, cash flow generative companies.

From wires, plugs, wiring services and many other related categories and segments, Hubbell is a large, important company with products practically everywhere.

Now would be a good time to see whether or not this company’s core financials and other relevant metrics and ratios are as desirable.

Enter Hubbell.

Hubbell’s stock financials

Hubbell, according to its current prevailing market capitalization, is a $16.33 billion company with a share price of $304.46, a present price-to-earnings (P/E) ratio of 25.39 along with an annually dished out dividend of $4.48.

In parsing through this initial information, it can be found that Hubbell’s share price (NYSE: HUBB) is a little bit on the expensive side of things, trading almost seven points higher than the commonly held, fair value price-to-earnings benchmark of 20, which is considered to indicate that a security (i.e., stock) is trading at exactly fair value, whereas in all actuality this company’s stock is a bit more expensive, standing overvalued relative to its actual, intrinsic value.

Slightly overpaying for an ownership stake in this company might be a venture well worth pursuing if the consistent revenue growth is there, however, for a company as large and established as this one, it might not be and thus overpaying for a whale might not be worth it.

Obviously, it hardly ever pays to buy the historical top.

We will add, however, that we do enjoy the fact that this company’s dividend is as large as it is (that is, if it can reasonably support it, which it more than likely can if it is as cash flow generative as we presume, which we will check on later in this stock analysis article), paying out nearly $5.00 to its shareholders annually ($4.48, to be exact) on top of the notable previous appreciation in share price in recent months and years shareholders have surely enjoyed.

Onto some of the more intricate details of Hubbell and its financial position, the company’s executive team is in charge of tending to just about $5.4 billion in terms of total assets as well as $3 billion in terms of total liabilities, which is a fine overall balance sheet structure for this company from our vantage point, as this company certainly has its fair share of inventory floating between it and its customers and partners and suppliers, perhaps adding a bit to its total liabilities count, however, this company is still well capitalized as its total assets still weigh heavier than its total liabilities.

With respect to the company’s income statement, Hubbell’s total annual revenues since 2018 have been just as expectedly boring, unexciting and consistent, with its revenues panning out to somewhere around $4 billion each year between (and including) 2018 and 2022, dipping a bit towards the lower end near $3.7 billion in 2020 (likely due to the onset and initial shock of COVID-19 and businesses and other venues not needing this company’s services during that era), however, the revenue rebound has been very real, likely due to complexes opening back up combined with the company leveraging some of its pricing power through raising its prices a touch due to past supply chain disruptions.

On the front of the company’s cash flow statement, both Hubbell’s net income and total cash from operations figures have also been positive and resoundingly consistent, with, for example, its total cash from operations ranging from $517 million (2018) and $648 million (2020), again, between 2018 and 2022.

Hubbell’s stock fundamentals

As it relates to the company’s trailing twelve month (TTM) net profit margin and its inherent ability to turn a profit after all things considered and accounted for, Hubbell’s TTM net profit margin definitely does not disappoint, as according to TD Ameritrade’s platform, it stands at 12.87% in comparison to the industry’s respective listed average of -128.55%, which is more than likely a distinct byproduct of being a market leader in the variety of categories Hubbell operates (dominates, really) within, as this company is also a consolidation machine, maintaining a healthy habit of acquiring smaller, regional companies in the electrical field(s) and subsequently taking them off the market for itself, which has proven to be a solid way to boost its margins over time.

Regarding the company’s TTM returns on assets and investment(s), Hubbell has outdone itself once again as on both of these fronts the company outpaces the industry’s relative averages.

For example, also according to the figures displayed on TD Ameritrade’s platform, Hubbell’s TTM return on investment stands at 15.2% to the industry’s respective average of 6.11%.

Hubbell is apparently very efficient and makes good use of its capital, at least, in comparison to its peers (on average).

Should you buy Hubbell stock?

Hubbell checks off a lot of boxes.

Its balance sheet is in fine form, its revenues have been consistent, it dishes out (and can seemingly, at face value, afford to pay out) a healthy annual dividend to its shareholder base, not to mention the fact that it is quite cash flow generative, its TTM net profit margin is healthy as a horse and its core TTM return metrics are also top-notch.

Boring, stable, dependable are just a few of the synonyms one could use to describe this company’s line of business and operations overall.

We love it.

However, one of the few sticking points is this company’s current valuation (specifically referencing its present price-to-earnings ratio), as we feel as though we would be cheating ourselves and the investable capital we’ve been given to steward if we made overpaying for even a strong, healthy company a habit.

And today will not be the day we make it one.

Therefore, it is only right that until this company’s stock price (NYSE: HUBB) comes a little bit back down to earth with respect to its current and future business prospects, we give it a “hold” rating.

DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.