Having raised full-year guidance three times in 2022, it's surprising to see nVent Electric's (NVT 1.91%) stock only up 3% in 2022, at this writing. Moreover, the stock's valuation continues to look very attractive, and the company's exposure to the long-term growth trend of electrification gives confidence that its strong growth trend can continue. Here's why nVent is an excellent stock for investors to consider buying. 

A long-term growth stock

The company makes electrical and connection products and sells to a wide range of end-market customers across the industrial, construction, infrastructure, and energy industries. In a nutshell, you can think of the stock as a pick-and-shovel play on the electrification trend in the economy. 

It's a clear trend driven by investment in infrastructure, renewable energy, energy storage, electric vehicles, charging networks, smart buildings, and industrial automation. Suppose a corporation, institution, or government invests in these trends. In that case, they will need to comply with regulations and ensure the efficiency of their electrical installations. That's where nVent's enclosures, electrical and fastening solutions, and thermal management solutions come in. 

As such, the case for buying the stock rests on the long-term secular megatrend of electrification. Given the momentum of the clean energy transition, the need to reshore production and invest in automation to reduce supply chain issues, and the need to create energy-efficient, sustainable buildings and infrastructure, that demand will only grow. 

nVent in 2022

While many of the stocks that try to play these themes are many years away from profitability or the earnings to justify their lofty valuations, nVent can already demonstrate its value. 

For example, here's a look at how management upgraded its full-year guidance throughout the year. CEO Beth Wozniak noted on the third-quarter earnings call: "Our third-quarter performance was a new record for sales and adjusted EPS, and once again exceeded our guidance. This marked our sixth consecutive quarter with organic sales growth at or above 20%, demonstrating our growth strategy is working."

nVent Full-Year Guidance

February

April

July

October

Organic sales growth

6%-9%

11%-13%

15%-17%

18%-19%

Adjusted EPS

$2.10-$2.20

$2.14-$2.22

$2.17-$2.23

$2.30-$2.32

Data source: nVent presentations.

Guidance still looks conservative

While sales growth in 2022 has been hugely impressive, it's unlikely to continue at this torrid pace for a long. For example, the midpoint of management's full-year guidance implies full-year reported sales of $2.87 billion, meaning fourth-quarter sales will be around $701 million -- a figure indicating just 4.7% growth over the fourth quarter of 2021.

Discussing the matter of its conservative-looking guidance on the earnings call, Wozniak noted that a lot of nVent's sales are "short cycle," and she was cautious because customers "may tend to modify their inventory positions as we go out of this fourth quarter."

In other words, nVent doesn't have a tremendous amount of visibility into its short-cycle sales (meaning a short amount of time between initial contact and orders), and there was a concern that a period of solid growth would lead to customers reducing inventory.

Customers potentially reducing inventory is a common theme in the industrial sector because many customers would have scrambled to place orders previously as lead times for product delivery lengthened due to the supply chain crisis. However, with the economy slowing and supply chain pressures easing, growth will likely moderate. 

nVent remains a good value

As such, it makes sense that Wall Street analysts are penciling in low-single-digit revenue growth for 2023. While that might not sound like much, it would mean nVent grew sales at a 7.5% annual rate from 2019 -- an impressive performance under the circumstances of a pandemic-ravaged economy.

Moreover, if nVent hits analyst expectations for free cash flow (FCF) of $412 million in 2023, it will trade on less than 16 times price to FCF. That's a reasonable valuation for a company with excellent long-term growth prospects.