How High Can Ingersoll-Rand Fly?

Shares of Ingersoll-Rand (NYSE: IR  ) hit a 52-week high yesterday. Let's look at how it got here and whether clear skies are ahead.

How it got here
Shares of Ingersoll-Rand have been recovering for the last year from a major drop and have finally reached a new peak. Operations are performing well with revenue rising slightly in the second quarter (excluding Hussmann) to $3.8 billion and adjusted earnings per share rising to $1.15 from $0.92 a year ago. But the stock's rise has been more about beating expectations than beating the company's previous results. The company has beaten earnings estimates by an average of 22% in the last three quarters, and shares have responded over that time.

While the stock has done well over the last nine months, Ingersoll-Rand hasn't been a great performer over the past five years. In fact, it hasn't performed well at all. The stock is down 4.1% compared to industrial equipment makers Caterpillar (NYSE: CAT  ) , Deere & Company (NYSE: DE  ) , and United Technologies (NYSE: UTX  ) , who have all risen over that time.

IR data by YCharts

We can get a peak into the reason Ingersoll-Rand has underperformed long term below. The company isn't growing as quickly as Caterpillar or Deere and doesn't have a strong return on assets either.

Company	Price/Book	Quarterly Revenue Growth	Return on Assets	Forward P/E
Ingersoll-Rand	2.0	-6.6%	4.8%	12.8
Caterpillar	3.6	22.1%	6.7%	8.5
Deere	4.5	14.5%	n/a	8.8
United Technologies	3.2	-4.6%	7.6%	12.4

Source: Yahoo! Finance.

But like I said, the expectations were low enough over the past year for the company to easily jump them, and that's why the stock has risen.

What's next?
So will Ingersoll-Rand continue to rise? If the economy continues to slowly improve, which I think it will, so with Ingersoll-Rand. But I think there are better ways to play the recovery.

Caterpillar and Deere have a better exposure to industrial market around the world and the U.S. agriculture market, where farmers will have strong profitability (if not yield). They're both also trading at lower forward P/E ratios and are growing quickly.

Before giving a ringing endorsement, I would like to see revenue growing faster and a better value in the stock in relation to peers. But our CAPS community disagrees and has given the stock a four-star rating (out of five). What do you think? Leave your thoughts in our comments section below.

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