Carrier Global Corp. (NYSE:CARR)

The valuation multiples exhibit a consistent pattern characterized by a general expansion in 2021 followed by a contraction in 2022. While profitability-based multiples showed significant volatility, revenue and book value multiples remained relatively stable over the observed three-year period.

Price to Earnings (P/E) and Price to Operating Profit (P/OP)

These earnings-related ratios experienced a notable increase in 2021, with the P/E rising to 23.68 and the P/OP to 14.90. However, a sharp reversal occurred in 2022, with the P/E dropping to 10.48 and the P/OP to 8.20. This decline represents a significant contraction in valuation relative to earnings and operating profits, falling below 2020 levels.

Price to Sales (P/S)

The P/S ratio demonstrated the highest degree of stability among all measured multiples. Values fluctuated minimally, moving from 1.85 in 2020 to a peak of 1.91 in 2021, and ending at 1.81 in 2022. This indicates a steady market valuation of the company's revenue generation capacity.

Price to Book Value (P/BV)

The P/BV ratio followed the general trajectory of the other multiples, peaking at 5.82 in 2021 before declining to 4.77 by the end of 2022. The 2022 figure represents the lowest valuation relative to book value within the analyzed timeframe, suggesting a reduction in the market premium attributed to the company's equity base.

The analysis of valuation multiples reveals a period of significant volatility in the Price-to-Earnings (P/E) ratio, driven by divergent movements between share price and earnings performance from 2020 through 2022.

Share Price Trends

The share price experienced an upward trajectory between 2020 and 2021, rising from US$ 37.25 to US$ 46.06, before undergoing a slight contraction to US$ 44.39 by the end of 2022.

Earnings per Share (EPS) Performance

Earnings exhibited a non-linear trend, with a marginal decrease from US$ 2.28 in 2020 to US$ 1.95 in 2021. This was followed by a substantial increase to US$ 4.24 in 2022, indicating a significant expansion in per-share profitability.

Price-to-Earnings (P/E) Ratio Interpretation

The P/E ratio reached a peak of 23.68 in 2021, reflecting a valuation expansion that occurred despite a simultaneous dip in EPS. In 2022, the ratio compressed sharply to 10.48. This contraction was primarily driven by the surge in EPS, which far outweighed the minor decline in share price, leading to a lower valuation multiple relative to the company's earnings power.

The valuation of the common stock relative to operating profit experienced notable volatility between 2020 and 2022. The Price to Operating Profit (P/OP) ratio peaked in 2021 before contracting to its lowest level within the analyzed period by the end of 2022, reflecting a divergence between market pricing and fundamental operating performance.

Share Price Movement

A positive trajectory was observed from 2020 to 2021, with the share price increasing from US$ 37.25 to US$ 46.06. This growth was followed by a slight correction in 2022, with the price closing at US$ 44.39.

Operating Profitability Trends

Operating profit per share exhibited a non-linear trend. A decrease was recorded in 2021, falling from US$ 3.55 to US$ 3.09. This was followed by a substantial increase in 2022, where operating profit per share rose to US$ 5.41, representing a significant expansion in operational efficiency or revenue growth.

P/OP Ratio Interpretation

The P/OP ratio increased from 10.50 in 2020 to 14.90 in 2021, a trend driven by the simultaneous rise in share price and decline in operating profit per share. In 2022, the ratio decreased sharply to 8.20. This compression was primarily the result of the strong surge in operating profit per share, which far outweighed the marginal decline in the share price, suggesting a more favorable valuation relative to operating earnings at the end of the period.

An analysis of the price-to-sales relationship between 2020 and 2022 reveals a period of relative valuation stability coupled with steady growth in top-line performance per share.

Revenue Performance per Share

Sales per share exhibited a consistent upward trend over the three-year period, rising from 20.08 US$ in 2020 to 24.48 US$ in 2022. This indicates a sustained increase in the company's ability to generate revenue on a per-share basis.

Share Price Movement

The share price experienced a significant increase from 37.25 US$ in 2020 to a peak of 46.06 US$ in 2021, followed by a marginal correction to 44.39 US$ in 2022.

Price-to-Sales (P/S) Ratio Stability

The P/S ratio remained remarkably stable, fluctuating minimally between a low of 1.81 in 2022 and a high of 1.91 in 2021. The narrow range of this multiple indicates that the market valuation of each dollar of sales remained consistent regardless of the fluctuations in the absolute share price.

The alignment between the growth in sales per share and the movements in share price suggests that the valuation was driven by fundamental revenue growth rather than a speculative expansion of the price multiple. The slight decrease in the P/S ratio in 2022, despite the continued increase in sales per share, reflects a modest contraction in the market's valuation multiple during that year.

An analysis of the valuation metrics from 2020 to 2022 reveals a fluctuating Price to Book Value (P/BV) ratio, driven by divergent movements between market pricing and the underlying book value per share.

Book Value Per Share (BVPS)

A consistent upward trend in book value per share is observed over the three-year period. BVPS increased from 7.19 US$ in 2020 to 7.91 US$ in 2021, and further rose to 9.30 US$ by the end of 2022. This steady growth indicates a continuous increase in the company's net asset value attributable to each share of common stock.

Share Price Volatility

The market price per share experienced significant growth between 2020 and 2021, rising from 37.25 US$ to 46.06 US$. However, this momentum reversed slightly in 2022, with the price declining to 44.39 US$.

Price to Book Value (P/BV) Ratio

The P/BV ratio peaked in 2021 at 5.82, reflecting a period where the share price grew at a faster rate than the book value, thereby increasing the premium the market paid over the accounting value. By 2022, the ratio contracted to 4.77, the lowest level in the observed period. This decline was the result of a simultaneous decrease in share price and a continued increase in book value, suggesting a compression in the valuation multiple and a closer alignment between the market price and the company's intrinsic book value.