What Happened:
Shares of water management solutions company Zurn Elkay (NYSE:ZWS) jumped 12.9% in the morning session after the S&P Dow Jones Indices announced that the company would be added to the S&P SmallCap 600 index before the opening of trading on Monday, September 23, 2024. Being included in the index means that Zurn Elkay Water Solutions will likely be held by many mutual funds and ETFs, which could potentially drive up demand for the stock.
We note that while buying of the stock could increase, this development does not change the fundamentals of the company. Revenue growth, expense efficiency, and capital intensity of the business, for instance, are not impacted by index inclusion or exclusion, so this is more of a technical tailwind for the stock.
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What is the market telling us:
Zurn Elkay is up 13.3% since the beginning of the year, and at $32.99 per share it is trading close to its 52-week high of $33.47 from March 2024. Investors who bought $1,000 worth of Zurn Elkay’s shares 5 years ago would now be looking at an investment worth $1,183.
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