NYSE:GRC
GORMAN RUPP CO
A specialized manufacturer of industrial valves and fittings generating $660M in 2024 revenue with strong operating cash flow.
Key Metrics
Investment Thesis
Bull Case
GRC offers compelling value through its consistent ability to convert revenue into operating cash flow, evidenced by a CFO/Net Income ratio of roughly 170%. The stabilization of revenue at $660M suggests the company has found a sustainable growth floor in mature energy markets. Investors can appreciate the balance sheet strength where current assets of $220.8M significantly exceed current liabilities of $87.5M, providing ample liquidity for operations.
Bear Case
The substantial accumulated other comprehensive loss of -$25.4M and a large retained earnings deficit of -$384.8M highlight underlying equity erosion that may not be fully reflected in current net income. Heavy investment outflows of $11.9M combined with significant debt levels could constrain future dividend growth or shareholder returns if energy demand weakens. The non-operating loss of $41.0M indicates potential volatility from interest rate hikes or foreign exchange headwinds impacting bottom-line stability.
About GORMAN RUPP CO
Gorman Rupp Co. (GRC) operates as a manufacturer of industrial valves, fittings, and related products serving the oil and gas, petrochemical, water treatment, and power generation sectors. The company leverages its extensive product portfolio to provide critical flow control solutions for global energy infrastructure projects. With revenue growth driven by strong operational cash flows, GRC maintains a robust balance sheet while navigating cyclical commodity markets.
Analysis
Management Discussion
Management executed a successful 2024 with revenue stabilizing at $659.7M after a strong 2023, while net income improved to $40.1M driven by operational efficiency. Despite a net decrease in cash of $6.3M due to significant financing outflows of $63.1M, the company generated healthy operating cash flow of $69.8M, indicating strong core business profitability. The substantial retained earnings deficit of $384.8M suggests past capitalization events or losses that warrant monitoring against future equity dilution risks.
Industry Overview
The industrial valves and fittings sector is integral to the global energy transition, supporting both traditional hydrocarbon extraction and emerging renewable infrastructure projects. Competition remains intense among established players like Gorman Rupp, requiring continuous innovation to meet stricter environmental regulations and efficiency standards. Market dynamics are currently shaped by regional supply chain constraints and the shifting capital expenditure priorities of major energy producers.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Revenue | $521.0M | $659.5M | $659.7M |
| Cost of Revenue | $390.1M | $463.3M | $455.3M |
| Gross Profit | $130.9M | $196.3M | $204.3M |
| Operating Expenses | $90.8M | $109.2M | $112.9M |
| Operating Income | $40.2M | $87.0M | $91.4M |
| G&A | $83.1M | $96.7M | $51.6M |
| Stock-Based Comp | $3.0M | $3.3M | $4.0M |
| D&A | $21.2M | $28.5M | $27.9M |
| Depreciation | $13.3M | $15.9M | $15.5M |
| Amortization | $7.6M | $12.6M | — |
| Other OpEx | $7.6M | $12.6M | $61.3M |
| Non-Operating Income | $-26.3M | $-43.1M | $-41.0M |
| Interest Expense | $19.2M | $41.3M | — |
| Pre-Tax Income | $13.9M | $44.0M | $50.5M |
| Income Tax | $2.7M | $9.0M | $10.4M |
| Continuing Ops | $11.2M | $35.0M | $40.1M |
| Discontinued Ops | $0 | $0 | $0 |
| Net Income | $11.2M | $35.0M | $40.1M |
| Minority Interest | $0 | $0 | $0 |
| Net to Common | $11.2M | $35.0M | $40.1M |
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Current Assets | $225.5M | $236.1M | $220.8M |
| Cash & Equivalents | $6.8M | $30.5M | $24.2M |
| Accounts Receivable | $93.1M | $89.6M | $87.6M |
| Inventory | $111.1M | $104.2M | $99.2M |
| Prepaid Expenses | $14.6M | $11.8M | $9.8M |
| Other Current Assets | $0 | $0 | $0 |
| Long-Term Assets | $647.3M | $654.2M | $637.6M |
| PP&E (Net) | $128.6M | $134.9M | $131.8M |
| Goodwill | $257.7M | $257.7M | $257.6M |
| Operating Leases | — | — | $19.0M |
| Other LT Assets | $260.9M | $261.7M | $229.3M |
| Total Assets | $872.8M | $890.4M | $858.5M |
| Current Liabilities | $85.2M | $100.7M | $87.5M |
| Accounts Payable | $24.7M | $23.3M | $24.8M |
| Current Debt | $17.5M | $21.9M | $18.5M |
| Current Leases | — | — | $1.2M |
| Other Current Liab | $34.0M | $43.0M | $33.1M |
| Long-Term Liabilities | $456.4M | $440.2M | $397.1M |
| Long-Term Debt | $419.3M | $382.6M | $348.1M |
| LT Operating Leases | — | — | $18.8M |
| Other LT Liab | $37.1M | $57.6M | $30.3M |
| Total Liabilities | $541.6M | $540.9M | $484.7M |
| Shareholders' Equity | $331.2M | $349.5M | $373.8M |
| Paid-In Capital | $3.9M | $5.8M | $9.4M |
| Retained Earnings | $346.7M | $363.5M | $384.8M |
| AOCI | $-24.5M | $-24.9M | $-25.4M |
| Total L&E | $872.8M | $890.4M | $858.5M |
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Net Income (CFO) | $11.2M | $35.0M | $40.1M |
| Non-Cash Adjustments | $-43.1M | $52.5M | $37.2M |
| Working Capital Changes | $45.5M | $10.7M | $-7.4M |
| Cash from Operations | $13.7M | $98.2M | $69.8M |
| Cash from Investing | $-545.7M | $-20.2M | $-11.9M |
| Cash from Financing | $414.1M | $-54.5M | $-63.1M |
| FX Effect | $-536.0K | $200.0K | $-1.1M |
| Net Change in Cash | $-118.4M | $23.7M | $-6.3M |
| Beginning Cash | $125.2M | $6.8M | $30.5M |
| Ending Cash | $6.8M | $30.5M | $24.2M |
Frequently Asked Questions
How does GORMAN RUPP CO make money?
The company's revenue is derived from manufacturing and selling industrial valves, fittings, and accessories primarily for the oil and gas exploration and production market. Additional streams include products for petrochemical processing plants, water and wastewater treatment facilities, and power generation applications requiring high-performance flow control components.
What are the main risks for GRC?
Exposure to cyclical oil and gas prices can impact customer demand and pricing power, particularly in exploration and production segments. The company holds significant goodwill of $257.6M which is susceptible to impairment charges if market conditions deteriorate sharply. High levels of long-term debt totaling $348.1M create interest rate sensitivity and leverage risks during periods of rising borrowing costs.
What is GRC's competitive advantage?
GRC benefits from a diversified product portfolio that reduces reliance on any single end-market cycle, providing stability during commodity price fluctuations. The company's established global distribution network and deep engineering expertise allow it to capture value in complex, high-specification projects where reliability is paramount. Strong free cash flow generation of $69.8M provides capital flexibility for strategic acquisitions or debt reduction.
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Not financial advice. All content is for informational purposes only. Data may contain errors. Consult a qualified financial advisor before making investment decisions.