ESP

We rate ESPEY MFG & ELECTRONICS CORP (ESP) as a Hold with a composite score of 62.5/100 at a current price of $58.59. 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 (78th percentile) and stability (68th percentile), which together account for the majority of the composite score. Offsetting weakness in value (25th percentile) and investment (34th percentile) tempers our overall conviction. We assign a No Moat rating (32/100), Low uncertainty, and Standard capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends; valuation compression risk if growth disappoints. 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.

ESPEY MFG & ELECTRONICS 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 62.5/100 places it at rank #462 in our full 7,333-stock universe. At N/A in market capitalization, ESPEY MFG & ELECTRONICS CORP is a small-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.

Despite positive momentum (78th percentile), revenue contraction of -12% creates a divergence between price action and fundamental trajectory. This divergence suggests either that the market is looking through near-term weakness or that technical factors are temporarily inflating the stock. Investors should assess whether the revenue decline reflects cyclical weakness or structural challenges.

The margin cascade tells an important story: gross margins of 29% (-13.5pp vs sector) narrow to operating margins of 17% (+16.1pp vs sector) and net margins of 17.1%, yielding a gross-to-net conversion rate of 59%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $58.59, ESPEY MFG & ELECTRONICS CORP is trading at a premium to fundamental value. Our value factor score of 25/100 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. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 26.4x (roughly in line with the sector median of 22.3x), EV/EBITDA of 25.9x (at a premium), P/B of 3.4x, P/S of 4.5x. 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 Low uncertainty rating to ESPEY MFG & ELECTRONICS CORP. The company exhibits strong financial stability with a beta of 0.53, and a stability factor in the 68th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: low beta of 0.53 — while defensive, this may indicate limited upside participation in bull markets. 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 68th percentile and quality factor at the 66th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (68th percentile) suggests predictable business dynamics; a 4.42% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate ESPEY MFG & ELECTRONICS CORP's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 12.8%, and the balance sheet is managed within acceptable parameters (D/E: 66%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; ESPEY MFG & ELECTRONICS CORP falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 4.42% 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, ESPEY MFG & ELECTRONICS CORP receives a Hold rating with a composite score of 62.5/100 (rank #462 of 7,333). Our quantitative framework assigns a No Moat (32/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 54/100.

Our analysis supports a neutral stance on ESPEY MFG & ELECTRONICS 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.