CRS

We rate CARPENTER TECHNOLOGY CORP (CRS) as a Hold with a composite score of 60.6/100 at a current price of $389.11. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in momentum (76th percentile) and quality (65th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (34th percentile) and stability (58th percentile) tempers our overall conviction. We assign a Narrow Moat rating (45/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

CARPENTER TECHNOLOGY CORP holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 60.6/100 places it at rank #640 in our full 7,333-stock universe. With a $15.7B market capitalization, CARPENTER TECHNOLOGY CORP operates at meaningful scale within the Manufacturing sector, providing competitive advantages in distribution, procurement, and customer reach.

The outlook is moderately positive, with revenue expanding at 1% and favorable momentum (76th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 28% (-14.2pp vs sector) narrow to operating margins of 20% (+18.4pp vs sector) and net margins of 14.2%, yielding a gross-to-net conversion rate of 50%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $389.11, CARPENTER TECHNOLOGY CORP is trading near fair value based on current fundamentals. Our value factor score of 62/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 47.7x (a 114% premium to the sector median of 22.3x), EV/EBITDA of 34.4x (at a premium), P/B of 9.8x, P/S of 6.8x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Medium uncertainty rating to CARPENTER TECHNOLOGY CORP. The stock presents a balanced risk profile: elevated market sensitivity (beta of 1.43) and elevated valuation multiple (P/E 47.7x) that leaves limited margin for error. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.43); elevated valuation multiple (P/E 47.7x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 58th percentile and quality factor at the 65th percentile provide a quantitative summary of the overall risk landscape.

We identify limited risk mitigants at this time, which contributes to our medium uncertainty assessment. Investors should monitor for improvement in balance sheet metrics, margin stability, and business predictability that could warrant a downgrade in our risk assessment over time.

We rate CARPENTER TECHNOLOGY CORP's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 20.5%, and the balance sheet is managed within acceptable parameters (D/E: 77%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; CARPENTER TECHNOLOGY CORP falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 0.25% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, CARPENTER TECHNOLOGY CORP receives a Hold rating with a composite score of 60.6/100 (rank #640 of 7,333). Our quantitative framework assigns a Narrow Moat (45/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 59/100.

Our analysis supports a neutral stance on CARPENTER TECHNOLOGY CORP. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.