To The Moon

Flowserve ( $Flowserve(FLS)$ ) presents a compelling investment opportunity, driven by its strong financial fundamentals, a favourable technical setup, and a promising business outlook, particularly in the nuclear energy sector. Here’s why Flowserve’s stock rise may just be the beginning.

1. Fundamentals: Profit Growth & Undervalued P/E Ratio

Flowserve's earnings growth and profitability make it an attractive investment. The company has been growing its earnings per share (EPS) at an impressive 14% per year over the last three years. This is accompanied by an improving EBIT margin, which rose by 2.1 percentage points to 10% over the last year—showing that its growth is sustainable and rooted in operational efficiency.

Moreover, Flowserve is trading at a price-to-earnings (P/E) ratio of 16 times estimated 2025 earnings, significantly lower than the broader S&P 500, which trades at almost 21 times earnings. This indicates that the stock remains undervalued compared to the market, offering a margin of safety for long-term investors.

The company’s insiders are aligned with shareholders, holding about $27 million worth of Flowserve stock. This demonstrates confidence in the long-term success of the company and adds to the investment appeal.

Earnings and Revenue History

2. Technical Strength: Breakout on the Horizon

Flowserve’s stock performance in 2024 has already impressed, rising 22% year-to-date, with momentum building. It is currently on track for its highest close since 2019 and has achieved its best two-day performance since June 2023, up 7.12% as of the latest trading session. This positive technical action signals that the stock is building strength, potentially fueled by growing investor awareness of its nuclear energy exposure.

Additionally, the chart shows a "Cup and Handle" (C&H) pattern—a bullish technical formation that often precedes further price breakouts. This pattern suggests that Flowserve is primed for more upside, with analysts targeting a price of $60 per share, offering significant upside from its current level of $52.15.

A C&H Pattern formed

3. Business Outlook: Nuclear Energy & AI Synergy

Flowserve is uniquely positioned as a hidden nuclear energy play. With its pumps, seals, and valves integral to industrial operations, including nuclear power generation, Flowserve’s nuclear business is set for growth. While currently representing just 3% to 4% of total sales, this segment is highly profitable and remains underappreciated by the market. Analysts like Andrew Obin of BofA have noted that growth in this division is not factored into current estimates, potentially leading to better-than-expected earnings in the coming years.

Moreover, Flowserve stands to benefit from macro trends in nuclear power adoption, particularly as tech giants like Microsoft ( $Microsoft(MSFT)$ ) and Amazon ( $Amazon.com(AMZN)$ ) push for clean, uninterrupted nuclear-based electricity to power their data centres. With related stocks like Talen Energy ( $Talen Energy Corp(TLNE)$ ) and Vistra ( $Vistra Energy Corp.(VST)$ ) surging due to their nuclear ties, Flowserve could experience similar momentum as investors seek to capitalize on the increasing demand for nuclear energy in the AI-driven world.

4. Positive Analyst Sentiment

Analysts are increasingly bullish on Flowserve, with 64% rating the stock a “Buy,” above the average Buy-rating ratio of 55% for S&P 500 companies. The average price target of $60 suggests over 15% potential upside from current levels, supported by Flowserve’s underappreciated growth prospects in the nuclear sector. The company’s ability to consistently deliver profits and grow its EPS further reinforces the bullish sentiment.

Outlook for Flowserve Stock

Flowserve is positioned to capitalize on the nuclear energy boom while maintaining solid growth in its core industrial operations. Its combination of undervalued fundamentals, technical momentum, and favourable business outlook creates a strong case for continued stock price appreciation. As the market begins to price in Flowserve's nuclear exposure, the stock is likely to move toward—and potentially beyond—the $60 analyst price target, offering investors a promising opportunity to participate in its upward trajectory.

@TigerWire