Gorman-Rupp (GRC)

Gorman-Rupp (NYSE:GRC) manufactures and sells pumps globally. fell short of the market’s revenue expectations in Q3 CY2025 as sales rose 2.8% year on year to $172.8 million. Its non-GAAP profit of $0.52 per share was 8% below analysts’ consensus estimates.

Company Overview

Powering fluid dynamics since 1934, Gorman-Rupp (NYSE:GRC) has evolved from its Ohio origins into a global manufacturer and seller of pumps and pump systems.

Gas and liquid handling companies possess the technical know-how and specialized equipment to handle valuable (and sometimes dangerous) substances. Lately, water conservation and carbon capture–which requires hydrogen and other gasses as well as specialized infrastructure–have been trending up, creating new demand for products such as filters, pumps, and valves. On the other hand, gas and liquid handling companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

Competitors of Gorman-Rupp include Xylem (NYSE:XYL), Flowserve (NYSE:FLS), and ITT (NYSE:ITT).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Gorman-Rupp’s 13.5% annualized revenue growth over the last five years was exceptional. Its growth beat the average industrials company and shows its offerings resonate with customers, a helpful starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Gorman-Rupp’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 2.6% over the last two years was well below its five-year trend.

We can dig further into the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Gorman-Rupp’s backlog reached $234.2 million in the latest quarter and averaged 12.7% year-on-year growth over the last two years. Because this number is better than its revenue growth, we can see the company accumulated more orders than it could fulfill and deferred revenue to the future. This could imply elevated demand for Gorman-Rupp’s products and services but raises concerns about capacity constraints.

This quarter, Gorman-Rupp’s revenue grew by 2.8% year on year to $172.8 million, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 4.7% over the next 12 months. Although this projection indicates its newer products and services will spur better top-line performance, it is still below average for the sector. At least the company is tracking well in other measures of financial health.

For industrials businesses, cost of sales is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics in the short term and a company’s purchasing power and scale over the long term.

Gorman-Rupp’s gross margin is slightly below the average industrials company, giving it less room to invest in areas such as research and development. As you can see below, it averaged a 28.6% gross margin over the last five years. That means Gorman-Rupp paid its suppliers a lot of money ($71.35 for every $100 in revenue) to run its business.

Gorman-Rupp produced a 29.2% gross profit margin in Q3, down 2.1 percentage points year on year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Gorman-Rupp has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 12%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Looking at the trend in its profitability, Gorman-Rupp’s operating margin rose by 3.3 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q3, Gorman-Rupp generated an operating margin profit margin of 12.4%, down 1.5 percentage points year on year. Since Gorman-Rupp’s gross margin decreased more than its operating margin, we can assume its recent inefficiencies were driven more by weaker leverage on its cost of sales rather than increased marketing, R&D, and administrative overhead expenses.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Gorman-Rupp’s solid 11.5% annual EPS growth over the last five years aligns with its revenue performance. This tells us its incremental sales were profitable.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Gorman-Rupp, its two-year annual EPS growth of 33% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, Gorman-Rupp reported adjusted EPS of $0.52, up from $0.49 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Gorman-Rupp’s full-year EPS of $2 to grow 18%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Gorman-Rupp has shown impressive cash profitability, enabling it to ride out cyclical downturns more easily while maintaining its investments in new and existing offerings. The company’s free cash flow margin averaged 9.3% over the last five years, better than the broader industrials sector.

Taking a step back, we can see that Gorman-Rupp’s margin dropped by 2.3 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

Gorman-Rupp’s free cash flow clocked in at $35.79 million in Q3, equivalent to a 20.7% margin. This result was good as its margin was 6.4 percentage points higher than in the same quarter last year. Its cash profitability was also above its five-year level, and we hope the company can build on this trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Gorman-Rupp’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 10.9%, slightly better than typical industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Uneventfully, Gorman-Rupp’s ROIC has stayed the same over the last few years. Rising returns would be ideal, but this is still a noteworthy feat since they're already high.

Gorman-Rupp reported $42.94 million of cash and $322.3 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $126.3 million of EBITDA over the last 12 months, we view Gorman-Rupp’s 2.2× net-debt-to-EBITDA ratio as safe. We also see its $13.14 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Gorman-Rupp beat analysts’ EBITDA expectations this quarter. On the other hand, its EPS missed and its revenue fell slightly short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded up 1.8% to $49.96 immediately following the results.

Updated: December 4, 2025 at 10:31 PM EST

Before investing in or passing on Gorman-Rupp, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

In our opinion, Gorman-Rupp is a good company. First off, its revenue growth was exceptional over the last five years. And while its cash profitability fell over the last five years, its backlog growth has been splendid. On top of that, its expanding operating margin shows the business has become more efficient.

Gorman-Rupp’s P/E ratio based on the next 12 months is 20.9x. Looking at the industrials landscape right now, Gorman-Rupp trades at a pretty interesting price. If you’re a fan of the business and management team, now is a good time to scoop up some shares.

Wall Street analysts have a consensus one-year price target of $59 on the company (compared to the current share price of $46.03), implying they see 28.2% upside in buying Gorman-Rupp in the short term.