Identification solutions manufacturer Brady (NYSE: BRC) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 7.5% year on year to $405.3 million. Its non-GAAP profit of $1.21 per share was 1.7% above analysts’ consensus estimates.

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Commentary:“Our investments in research and development continue to add value for our customers and drive organic sales growth. We reported strong organic sales growth in the Americas & Asia region, and our Europe & Australia region reported a significant improvement in segment profit in the quarter,” said Brady’s President and CEO, Russell R. Shaller.

Company Overview

Founded in 1914 and evolving through more than a century of industrial innovation, Brady (NYSE: BRC) manufactures and supplies identification solutions and workplace safety products that help companies identify and protect their premises, products, and people.

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $1.54 billion in revenue over the past 12 months, Brady is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels. On the bright side, it can grow faster because it has more room to expand.

As you can see below, Brady grew its sales at a solid 7.5% compounded annual growth rate over the last five years. This shows it had high demand, a useful starting point for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Brady’s annualized revenue growth of 7.2% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong.

This quarter, Brady reported year-on-year revenue growth of 7.5%, and its $405.3 million of revenue exceeded Wall Street’s estimates by 2.6%.

Looking ahead, sell-side analysts expect revenue to grow 4% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will see some demand headwinds.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Brady has been an efficient company over the last five years. It was one of the more profitable businesses in the business services sector, boasting an average operating margin of 16.5%.

Looking at the trend in its profitability, Brady’s operating margin rose by 3.1 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Brady generated an operating margin profit margin of 16.8%, up 1.1 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Brady’s EPS grew at an astounding 15.7% compounded annual growth rate over the last five years, higher than its 7.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of Brady’s earnings can give us a better understanding of its performance. As we mentioned earlier, Brady’s operating margin expanded by 3.1 percentage points over the last five years. On top of that, its share count shrank by 8.7%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Brady, its two-year annual EPS growth of 11.1% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, Brady reported adjusted EPS of $1.21, up from $1.12 in the same quarter last year. This print beat analysts’ estimates by 1.7%. Over the next 12 months, Wall Street expects Brady’s full-year EPS of $4.69 to grow 9.3%.

Key Takeaways from Brady’s Q3 Results

We enjoyed seeing Brady beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock remained flat at $75 immediately after reporting.

Indeed, Brady had a rock-solid quarterly earnings result, but is this stock a good investment here? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.