Should Investors Hold Wabtec Stock Despite Its Higher Valuation?

Wabtec Corporation WAB looks expensive from a valuation standpoint. Considering the forward 12-month price-to-sales ratio (P/S-F12M), WAB is trading at a premium compared to the industry.

The stock has a forward 12-month P/S-F12M of 3.41X compared with 2.37X for the industry over the past five years. The company’s forward 12-month P/S-F12M ratio is also above the median level of 2.14X over the past five years. These factors indicate that the stock’s valuation is unattractive. WAB has a Value Score of D.

WAB P/S Ratio (Forward 12 Months) Vs. Industry

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Now, the question is whether it is worth buying, holding, or selling the WAB stock at current prices. Let us delve deeper to find out.

Risks Weighing on WAB Stock

Although economic activities have picked up from the pandemic gloom, some supply-chain disruptions remain. Factors like higher commodity costs and shortage of components, chips and labor are major headwinds. Total operating expenses increased 9.7% year over year in 2023. Operating costs increased 4.8% in 2024, mainly due to higher SG&A costs. Total operating expenses during 2025 increased 14.6% from the year-ago quarter to $2.01 billion. High operating expenses are likely to hurt Wabtec's bottom line.

Further, Wabtec has substantial operations outside the United States and generates a significant portion of its net revenues from sales to customers outside the country. Hence, volatility in foreign exchange is a significant concern. Economic and political uncertainty is an overhang on the company’s financials.

WAB Stock’s Price Performance

Shares of Wabtec have gained 24.9% in the past six months, outperforming the Zacks Transportation - Equipment and Leasing industry’s 5.8% growth, as well as that of other industry players, The Greenbrier Companies, Inc. (GBX) and Ryder Corporation R, within the same time frame.

WAB Stock Six-Month Price Comparison

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Factors Working in Favor of WAB Stock

WAB’s focus on new technologies improves the safety, cost and reliability of railroads, supporting the modernization of global rail fleets. Of late, WAB has introduced a number of significant new products, including PTC equipment that includes onboard digital data and global positioning communication protocols.

To combat inflationary pressures, WAB is focusing on cost-cutting measures and making efforts to improve productivity and efficiency. The company also aims to boost profitability by exiting various low-margin product offerings through portfolio optimization. Apart from cost control initiatives, WAB aims to provide real-time visibility and optimization to help busy railroads stay on schedule and recover from disruptions faster, which should help acquire and retain customers.

Its strong free cash flow-generating ability helps in making consistent dividend payments and share buybacks. Such shareholder-friendly initiatives should boost investor confidence and positively impact the bottom line.

What Do Earnings Estimates Say for WAB?

The positive sentiment surrounding WAB stock is evident from the fact that the Zacks Consensus Estimate for the first-quarter 2026 as well as the second-quarter 2026 earnings has been revised upward in the past 90 days. The consensus mark for full-year 2026 and 2027 earnings has also been projected northward in the past 90 days.

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The favorable estimate revisions indicate brokers’ confidence in the stock.

Time to Retain Wabtec Stock

It is understood that WAB stock is currently unattractively valued. Moreover, WAB continues to suffer from lingering supply chain issues and high operating expenses. Economic and political uncertainty is an overhang on the company’s financials. Wabtec’s global presence exposes it to fluctuations in foreign currency exchange rates.

Despite the headwinds, we advise investors not to sell WAB stock now due to the positive developments, like focus on new technologies to improve safety and reliability, together with its restructuring actions and cost-cutting initiatives, coupled with its shareholder-friendly moves in the form of dividend payments and share buybacks.

We advise investors to wait for a better entry point. For those who already own the stock, it will be prudent to stay invested. The company’s current Zacks Rank #3 (Hold) justifies our analysis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Ryder System, Inc. (R): Free Stock Analysis Report

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Wabtec (WAB): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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