{"id":31505,"date":"2015-01-26T11:00:40","date_gmt":"2015-01-26T16:00:40","guid":{"rendered":"http:\/\/www.ino.com\/blog\/?p=31505"},"modified":"2015-01-26T11:00:40","modified_gmt":"2015-01-26T16:00:40","slug":"will-whirlpools-price-continue-to-climb","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2015\/01\/will-whirlpools-price-continue-to-climb\/","title":{"rendered":"Will Whirlpool's Price Continue to Climb?"},"content":{"rendered":"

\"WilliamCikos_Contributor_ImageBadge350\"<\/p>\n


<\/p>\n

On January 12th, shares of Whirlpool Corp. (NYSE:WHR) crossed the $200\/sh threshold for the first time ever. Now trading at $200.92\/sh, the stock has risen by 44% in the last 4 months.<\/p>\n

\"Whirlpool
\nChart courtesy of YCharts.com.<\/i><\/small><\/p>\n

The rapid price rise is nothing new; Whirlpool\u2019s stock is in the midst of an extended run of robust performance. Over the last 3 years, WHR has increased almost four-fold, climbing by 277% since being quoted at $53.33\/sh on January 23rd, 2012. During that same period, the company\u2019s earnings expanded by 137% to their current level of $9.41\/sh.<\/p>\n

Looking at these numbers alone, one might assume that the stock is due for a correction. Has its price climbed too quickly? Is the stock overvalued? I\u2019d argue that WHR remains undervalued, and that investors can expect the stock to continue outperforming the market with ease.<\/p>\n

\"Whirlpool
\nChart courtesy of YCharts.com.<\/i><\/small><\/p>\n

With a P\/E ratio of 21.4, the company\u2019s earnings multiplier currently sits near its 10-year high point (see chart above). While this would typically imply that a stock is overvalued, Whirlpool\u2019s rapid earnings growth makes it an exception. With YOY earnings growth projected to be 29% next year, Whirlpool has a forward P\/E ratio of just 14, which lies near the midpoint of its long-term historical P\/E range. <\/p>\n

Additionally, with annual EPS growth projected to be 23% in the next 5 years, WHR has a PEG ratio of just 0.94. It\u2019s an extreme rarity for a blue chip stock with a dominant market share in its respective industry to be trading at a PEG ratio below 1. To the delight of investors who think they\u2019ve \u201cmissed out\u201d on WHR\u2019s large returns these past couple of years, its minuscule PEG ratio bears proof that the stock is still a strong buying opportunity. For a company of Whirlpool\u2019s size ($15.6B market cap) and stature, its growth-based valuation tends to be the most accurate indicator of future price performance.<\/p>\n

Assuming the company\u2019s bottom line sustains the high level of growth that it\u2019s projected to, Whirlpool\u2019s shareholders are due to continue collecting a high return on their investment in the coming years. Furthermore, the company pays a quarterly dividend of $0.75\/sh, or $3.00\/sh on an annual basis. At the stock\u2019s current price, this represents an annual dividend yield of 1.4%. Although the yield isn\u2019t anything to write home about, it represents a guaranteed 1.4% cash return in addition to whatever gains the stock\u2019s quickly-climbing price generates.<\/p>\n

Why have earnings been growing so quickly? <\/h2>\n

The majority (about half) of Whirlpool\u2019s customer base is in the U.S., where the amount of newly built homes has increased rather quickly over the last 5 years.<\/p>\n

\"New
\nChart courtesy of the United States Census Bureau.<\/i><\/small><\/p>\n

As you can see in the graph above, the amount of newly built houses has just about doubled from when the market hit its low point just a few years ago. This has been the largest contributing factor that\u2019s propelling the company\u2019s bottom line growth. Whirlpool is the world\u2019s #1 home appliance maker, and all those newly built homes need to be filled with appliances. Naturally, this has created a lot of demand for the company\u2019s products.<\/p>\n

Whirlpool\u2019s customer base has also enjoyed an increase in purchasing power. The low-interest rate environment has allowed people to finance their home purchases cheaply, thereby giving them excess capital to spend on home appliance purchases. Furthermore, the cheap price of oil has freed up capital in household budgets across the country, allowing consumers to allocate more capital towards home appliance purchases. Whirlpool will continue to be a large beneficiary of the pervading economic environment, so long as interest rates and oil prices remain low. <\/p>\n

I expect those factors to continue in the coming years, namely the zero percent interest rate policy. Regardless of what the Fed has been \u201chinting,\u201d the very fact that our central bank has hinted at a future rise in interest rates is a strong indicator that it won\u2019t happen any time soon. Interest rates haven\u2019t risen in over 8 years. In my view, any talk of the Fed\u2019s \u201cplans\u201d is just a cop out to continue what they\u2019ve been doing, without receiving any scrutiny for the long-term implications of continuing the zero percent interest rate policy indefinitely. After all, they are \u201cplanning\u201d on raising them, right? Well, if they actually wanted to do it, they would\u2019ve done it already. So it only seems logical that it\u2019s here to stay.<\/p>\n

With that said, I expect the bullish projections for Whirlpool\u2019s earnings growth to be accurate. Over the last 3 years, Whirlpool\u2019s EPS has swelled by 137%, or 33% annually. Going forward, the company has set ambitious expectations for its bottom line growth, targeting earnings per share to double by 2018. This represents an annual EPS growth rate of 19% over a 4-year period.<\/p>\n

Conclusion <\/h2>\n

At a time when companies are returning more cash to shareholders \u2013 through stock buybacks and dividend payments \u2013 than ever before, Whirlpool is one of the few blue chips that\u2019s actually reinvesting the bulk of its earnings into its business. This bodes extremely well for achieving sustainable growth in the long-term. I consider WHR to be one of the better opportunities on the market to go long on. For those who do so, considering how quickly the stock has risen lately, I recommend dollar cost-averaging your shares in order to hedge for the risk of any short-term corrections.<\/p>\n

William Cikos<\/a>
\nINO.com Contributor - Equities<\/p>\n

Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

On January 12th, shares of Whirlpool Corp. (NYSE:WHR) crossed the $200\/sh threshold for the first time ever. Now trading at $200.92\/sh, the stock has risen by 44% in the last 4 months. Chart courtesy of YCharts.com. The rapid price rise is nothing new; Whirlpool\u2019s stock is in the midst of an extended run of robust […]<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6920],"tags":[7137,7135,7134,7136,7132,7133,6973],"class_list":["post-31505","post","type-post","status-publish","format-standard","hentry","category-ino-com-contributors","tag-equity-advisor","tag-good-stocks","tag-hot-stocks","tag-stock-advice","tag-whirlpool","tag-whr","tag-william-cikos"],"yoast_head":"\nWill Whirlpool's Price Continue to Climb? - INO.com Trader's Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ino.com\/blog\/2015\/01\/will-whirlpools-price-continue-to-climb\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Will Whirlpool's Price Continue to Climb? - INO.com Trader's Blog\" \/>\n<meta property=\"og:description\" content=\"On January 12th, shares of Whirlpool Corp. 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