Can RBC Bearings Incorporated (NASDAQ:ROLL) Save Your Portfolio?

RBC Bearings Incorporated is a financially healthy and robust stock with a proven track record of outperformance. We all know RBC Bearings, and having this large-cap to cushion your portfolio during a volatile period in the stock market isn’t a bad idea. Today I will give a high-level overview of the stock, and why I believe it’s still attractive.

RBC Bearings Incorporated manufactures and markets engineered precision bearings and components in North America, Europe, Asia, and Latin America. Founded in 1919, and run by CEO Michael Hartnett, the company employs 3.76k people and has a market cap of US$3.9b, putting it in the mid-cap stocks category. Bear market volatility can have a short-term impact on large, well-established companies, but in the long-run, these businesses are likely to prevail. This is because fundamentally, nothing has changed. A fall in share price is hardly detrimental to its financial health and business operations. So, large-cap stocks are a safe bet to buy more of when the stock market is selling off.

Currently RBC Bearings has US$26m on its balance sheet, which requires regular interest payments. This requires the business to have enough cash to meet these upcoming interest expenses. RBC Bearings generates enough earnings to cover its interest payments, more specifically, its interest coverage ratio (EBIT/interest) is 37.69x, which is well-above the minimum requirement of 3x. Furthermore, its cash flows from operations copiously covers it debt by more than 2x, which is higher than the bare minimum requirement of 0.2x. And, a given, its liquidity ratio holds up well with cash and other liquid assets exceeding upcoming liabilities, meaning ROLL’s financial strength will continue to let it thrive in a fickle market.

ROLL’s annual earnings growth rate has been positive over the last five years, with an average rate of 14%, outpacing the industry growth rate of 6.8%. It has also returned an ROE of 11% recently, above the market return of 14%. This consistent market outperformance illustrates a robust track record of delivering strong returns over a number of years, increasing my conviction in RBC Bearings as an investment over the long run.