In the eighteen months between December 2022 and May 2024, the stock of Core & Main Inc., a leading water infrastructure manufacturer based in Saint Louis, Missouri, rose more than three-fold. The price surged from under $19 to over $62 a share in a near-straight line, interrupted only by a few shallow dips along the way. And just as it felt as if nothing can stop the bulls, CNM fell back down to $37 by September, losing as much as 40% in just four months.
Core & Main has since returned to over $52.50 since, but can investors trust this recovery or should they brace for another selloff? Fortunately, the surge to over $62 didn’t exactly move in a straight line. Instead, it produced a very interesting Elliott Wave pattern, giving us a hint about the future.
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The sharp surge from under $19 was, of course, a five-wave impulse. We’ve labeled it (1)-(2)-(3)-(4)-(5), where wave (3) is still longer than (1), but the extended wave here is the fifth one. It is almost exactly 2.618 times longer than wave (3) and its five sub-waves are also visible, marked 1-2-3-4-5. In this respect, the drop from $62 to $37 is the natural three-wave correction, which follows every impulse. But does the current recovery stand for the resumption of the preceding uptrend then?
We doubt it, for two main reasons. One, extended fifth waves are usually almost entirely erased by the following retracement. That’s not the case here. And two, Core & Main trades at a forward P/E ratio of 21.5, which is expensive for a company with a mid-single digit revenue growth rate. We therefore think that the drop to $37 was only wave (a) of a bigger expanding flat correction, whose wave (b) is now in progress.
It is supposed to evolve into another a-b-c zigzag structure and waves ‘a’ and ‘b’ seem to be in place already. Once wave ‘c’ completes wave (b) somewhere around the previous all-time high, it would be time for an impulsive selloff in wave (c). Downside targets close to the support near $32 would make sense once the bears return. This would bring Core & Main’s multiple to a much more reasonable ~12, assuming that analysts’ fiscal 2026 earnings estimates remain unchanged.
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