Griffon (GFF) AI Stock Analysis

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Griffon

(NYSE:GFF)

70Outperform

Griffon's stock is rated at 70, reflecting strong financial performance and earnings outlook, balanced by technical weakness and valuation concerns. The company's solid cash flow and profitability metrics provide a stable base, while the earnings call highlights operational strengths and challenges. However, the technical indicators suggest caution, and the high debt level remains a risk factor.

Positive Factors

EBITDA Margin Achievement

HBP EBITDA margin exceeded expectations, reaching 31.7%, supported by increased revenue and reduced material costs.

Improved Profitability

CPP profitability improved significantly, with EBITDA rising to $25 million from $14 million in the prior year due to stronger revenue and improved production costs.

Share Buyback Program

Griffon's capital allocation remains supportive with a new $400 million share buyback program and guidance of $1 billion+ free cash flow over the next three years.

Negative Factors

Earnings Expectations

FQ3 results were slightly below Street estimates, but more importantly, we sensed investors were also looking for upside (combination of seasonality and recent trends), suggesting a higher bar to begin with.

Impact of Steel Prices

Lower sales and higher costs were the driver, with management indicating higher steel prices hurt margins by 'a few hundred bps' this quarter.

Revenue Decline

HBP revenue and margins lighter than we modeled. HBP revenue declined -2% (vs. our -1% estimate), as increased residential volumes were offset by lower commercial volumes.

Griffon (GFF) vs. S&P 500 (SPY)

Market Cap

$3.20B

Dividend Yield0.98%

Average Volume (3M)483.24K

Price to Earnings (P/E)13.7

Beta (1Y)1.04

Revenue Growth-2.47%

EPS Growth249.49%

CountryUS

Employees5,300

SectorIndustrials

Sector Strength72

IndustryConglomerates

Share Statistics

EPS (TTM)4.91

Shares Outstanding47,530,098

10 Day Avg. Volume504,441

30 Day Avg. Volume483,243

Financial Highlights & Ratios

PEG Ratio0.05

Price to Book (P/B)N/A

Price to Sales (P/S)1.29

Price to Cash Flow (P/CF)5.90

P/FCF Ratio5.20

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$94.80

Price Target Upside40.84% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering5

Griffon Business Overview & Revenue Model

Company DescriptionGriffon Corporation, through its subsidiaries, provides consumer and professional, and home and building products in the United States, Europe, Canada, Australia, and internationally. Its Consumer and Professional Products segment manufactures and markets long-handled tools and landscaping products for homeowners and professionals; wood and wire closet organization, general living storage, and wire garage storage products to home center retail chains, mass merchandisers, and direct-to builder professional installers; wheelbarrows and lawn carts; snow, striking, and hand tools; planters and lawn accessories; garden hoses; and pruners, loppers, shears, and other tools, as well as cleaning products for professional, home, and industrial use. The company's Home & Building Products segment manufactures and markets residential and commercial garage doors for professional dealers and various home center retail chains; and rolling steel door and grille products for commercial, industrial, institutional, and retail uses. It sells its products under the True Temper, AMES, ClosetMaid, Clopay, Ideal, Holmes, CornellCookson, Garant, Harper, UnionTools, Westmix, Cyclone, Southern Patio, Northcote Pottery, Nylex, Hills, Kelkay, Tuscan Path, La Hacienda, Kelso, Dynamic Design, Apta, Quatro Design, Razor-Back, Jackson, Darby, Trojan, Supercraft, NeverLeak, Maximum Load, SuperSlide, ShelfTrack, MasterSuite, Suite Symphony, ExpressShelf, Style+, and SpaceCreations brand names. The company was formerly known as Instrument Systems Corporation and changed its name to Griffon Corporation in June 1992. Griffon Corporation was founded in 1959 and is headquartered in New York, New York.

How the Company Makes MoneyGriffon Corporation generates revenue through the manufacturing and sale of a wide range of consumer and professional products as well as home and building products. In the Consumer and Professional Products segment, revenue is primarily derived from the sale of tools, lawn and garden products, and storage solutions under well-known brands. The Home and Building Products segment contributes to revenue through the sale of garage doors, rolling steel doors, and related components. Griffon leverages its extensive distribution networks and relationships with major retailers and distributors to ensure product availability and maximize sales. The company also benefits from strategic acquisitions that expand its product offerings and market reach, thereby enhancing its revenue potential.

Griffon Financial Statement Overview

Summary

Griffon shows solid profitability and efficient cash flow management, with strong returns on equity. However, challenges include declining revenue and a high debt-to-equity ratio, which could pose financial risks if not managed properly.

Income Statement

Positive

The company demonstrates strong profitability with a gross profit margin of 40.7% and a net profit margin of 9.1% for TTM. However, revenue has been slightly declining in recent years, with a 8.2% decrease from 2022 to 2023. Despite this, the EBIT and EBITDA margins are robust, indicating efficient cost management.

Balance Sheet

Positive

Griffon has a high debt-to-equity ratio of 0.83 in TTM, indicating significant leverage, which could pose financial risk if not managed properly. The return on equity is strong at 104.7%, suggesting effective use of equity to generate profits. However, the equity ratio of 9.8% shows a low proportion of equity financing, raising concerns about financial stability.

Cash Flow

Very Positive

The cash flow statement highlights a healthy cash generation capability, with a strong operating cash flow to net income ratio of 1.58 in TTM. The free cash flow has grown by 17.9% from 2023 to 2024, indicating robust cash flow management, which is crucial for maintaining liquidity and funding operations.

TTM	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Breakdown
Income Statement		Total Revenue
2.61B	2.62B	2.69B	2.85B	2.27B	2.41B
	Gross Profit
1.06B	1.02B	1.03B	936.89M	641.11M	641.43M
	EBIT
426.55M	398.30M	196.89M	335.06M	170.58M	155.03M
	EBITDA
521.75M	461.44M	463.13M	-121.84M	245.21M	208.09M
	Net Income Common Stockholders
238.57M	209.90M	77.62M	-287.71M	79.21M	53.43M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
348.44M	114.44M	102.89M	120.18M	248.65M	218.09M
	Total Assets
1.17B	2.37B	2.42B	2.82B	2.60B	2.46B
	Total Debt
201.62M	1.71B	1.65B	1.76B	1.19B	1.21B
	Net Debt
-146.82M	1.59B	1.55B	1.64B	946.23M	996.78M
	Total Liabilities
468.79M	2.15B	2.10B	2.34B	1.80B	1.76B
	Stockholders Equity
698.28M	224.89M	315.24M	477.57M	807.16M	700.15M
Cash Flow		Free Cash Flow
305.79M	308.87M	365.17M	26.95M	74.82M	85.01M
	Operating Cash Flow
377.31M	380.04M	428.77M	69.44M	111.77M	134.01M
	Investing Cash Flow
-52.13M	-67.78M	-45.21M	-585.85M	-49.42M	-58.86M
	Financing Cash Flow
-282.92M	-298.75M	-400.16M	393.35M	-28.25M	68.19M

Griffon Technical Analysis

Technical Analysis Sentiment

Negative

Last Price67.31

Price Trends

50DMA

70.74

Negative

100DMA

73.50

Negative

200DMA

70.61

Negative

Market Momentum

MACD

-1.31

Positive

RSI

44.87

Neutral

STOCH

36.06

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GFF, the sentiment is Negative. The current price of 67.31 is below the 20-day moving average (MA) of 69.04, below the 50-day MA of 70.74, and below the 200-day MA of 70.61, indicating a bearish trend. The MACD of -1.31 indicates Positive momentum. The RSI at 44.87 is Neutral, neither overbought nor oversold. The STOCH value of 36.06 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for GFF.

Griffon Risk Analysis

Griffon disclosed 32 risk factors in its most recent earnings report. Griffon reported the most risks in the “Production” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Griffon Peers Comparison

Overall Rating

UnderperformOutperform

Sector (63)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
VMI	74 Outperform	$5.69B	16.51	22.84%	0.85%	-0.57%	116.12%
GFF	70 Outperform	$3.20B	13.69	93.05%	0.98%	-2.47%	249.49%
MDU	68 Neutral	$3.45B	12.42	10.51%	3.02%	-22.50%	-32.26%
CODI	63 Neutral	$1.28B	―	-4.98%	5.84%	6.77%	9.95%
Sector *	63 Neutral	$4.27B	11.40	5.38%	214.75%	4.10%	-8.98%
SPLP	55 Neutral	$593.65M	2.78	25.02%	―	6.37%	86.42%
MATW	49 Neutral	$636.10M	―	-13.19%	4.78%	-7.12%	-284.19%

* Industrials Sector Average

Performance Comparison

GFF

Griffon

67.31

0.21

0.31%

CODI

Compass Diversified Holdings

17.03

-4.43

-20.64%

MATW

Matthews International

20.54

-6.05

-22.75%

MDU

Mdu Resources Group

16.87

3.37

24.96%

SPLP

Steel Partners Holdings

35.98

0.47

1.32%

VMI

Valmont

292.87

85.40

41.16%

Griffon Earnings Call Summary

Earnings Call Date: Feb 5, 2025 | % Change Since: -9.19% | Next Earnings Date: Apr 30, 2025

Earnings Call Sentiment Positive

Griffon's earnings call reflected a strong start to Fiscal 2025 with robust free cash flow and improved profitability in the Consumer and Professional Products segment, alongside continued share repurchases and stable dividends. However, challenges included decreased CPP revenue, reduced commercial volume in the Home and Building Products segment, and concerns over tariffs.

Highlights

Strong Free Cash Flow

Griffon delivered robust free cash flow of $143 million in Q1 Fiscal 2025, indicating solid operating performance.

Consumer and Professional Products (CPP) Profitability Improvement

CPP EBITDA in the first quarter increased by $13 million to $18 million, reflecting positive effects of global sourcing expansion and increased volume in Australia.

Stock Repurchase Program

Griffon repurchased $42 million of its stock during the first quarter, reducing outstanding shares by 16.7% since April 2023.

Stable Dividend Growth

Griffon declared a regular quarterly dividend of $0.18 per share, marking the 54th consecutive quarterly dividend, with an annualized compounded growth rate of over 18% since 2012.

Improved Gross Profit

Gross profit increased from $237 million to $264 million compared to the prior year quarter, with normalized gross margin up by 320 basis points to 41.8%.

Improved EBITDA Margin

Adjusted EBITDA margin before unallocated amounts increased by 270 basis points to 23%.

Lowlights

CPP Revenue Decline

First quarter revenue for CPP decreased by 4%, mainly due to decreased volume and reduced consumer demand in North America and the UK.

Commercial Volume Decline in Home and Building Products (HBP)

HBP revenue was consistent with the prior year, but commercial volume was reduced, offsetting increased residential volume.

Tariff Concerns

Potential impact from tariffs on Mexico, Canada, and China, especially affecting the Lawn and Garden and Hunter Fan businesses.

Company Guidance

During the first quarter of fiscal 2025, Griffon Corporation reported strong financial performance, with free cash flow reaching $143 million. The Home & Building Products (HBP) segment saw a 2% increase in EBITDA, despite flat revenue compared to the prior year, due to increased residential volume offset by reduced commercial volume. The Consumer and Professional Products (CPP) segment experienced a 4% revenue decline but achieved a $13 million rise in EBITDA, reaching $18 million, driven by the global sourcing expansion and growth in Australia. The company repurchased $42 million worth of stock and maintained a quarterly dividend of $0.18 per share. Total revenue for the quarter was $632 million, a 2% decrease year-over-year, while adjusted EBITDA rose by 11% to $145 million. The company reiterated its fiscal 2025 guidance, targeting $2.6 billion in revenue and $575 million to $600 million in segment adjusted EBITDA, with free cash flow expected to exceed net income.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.