Major global plumbing company RWC fell 4% on Wednesday, and now trades over 20% below its March high. While the recovery in earnings demonstrated earlier in the year is not without risk, we see the majority of earnings drivers, including margins and volumes, improving rather than declining for RWC. However, sentiment toward construction-facing stocks has deteriorated over recent weeks, with Reece (REH) and James Hardie (JHX) falling 15% and 20% respectively. From a valuation perspective, RWC generally trades on 16.8x, but recent weakness has pushed this multiple down to 13.9x, around 17% ‘cheap’.
- We like RWC around $4.50, although we are conscious of the stock’s current downtrend.
MM is cautiously bullish RWC around $4.50
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