Since January 2025, Regal Rexnord has been in a holding pattern, floating around $151.68. The stock also fell short of the S&P 500’s 7.6% gain during that period.

Is there a buying opportunity in Regal Rexnord, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is Regal Rexnord Not Exciting?

We're sitting this one out for now. Here are three reasons why we avoid RRX and a stock we'd rather own.

1. Core Business Falling Behind as Demand Declines

We can better understand Engineered Components and Systems companies by analyzing their organic revenue. This metric gives visibility into Regal Rexnord’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.

Over the last two years, Regal Rexnord’s organic revenue averaged 6% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Regal Rexnord might have to lean into acquisitions to grow, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus).

2. EPS Took a Dip Over the Last Two Years

Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.

Sadly for Regal Rexnord, its EPS declined by 5% annually over the last two years while its revenue grew by 7.1%. This tells us the company became less profitable on a per-share basis as it expanded.

3. Previous Growth Initiatives Haven’t Impressed

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Regal Rexnord historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 4.8%, lower than the typical cost of capital (how much it costs to raise money) for industrials companies.

Final Judgment

Regal Rexnord’s business quality ultimately falls short of our standards. With its shares underperforming the market lately, the stock trades at 15× forward P/E (or $151.68 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere. We’d suggest looking at one of our top software and edge computing picks.

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