Is Trinity Industries, Inc. (NYSE: TRN) potentially undervalued?
While Trinity Industries, Inc. (NYSE:TRN) may not be the best-known stock right now, it has garnered a lot of attention due to a substantial price move on the NYSE over the past few months, hitting $28.10 at one point. , and falling as low as US$21.35. Certain movements in the stock price can give investors a better opportunity to get into the stock and potentially buy at a lower price. One question to answer is does Trinity Industries’ current trading price of US$22.05 reflect the true value of the small cap? Or is it currently undervalued, giving us the opportunity to buy? Let’s take a look at the outlook and value of Trinity Industries based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Trinity Industries
What is the opportunity in Trinity Industries?
According to my multiple price model, where I compare the company’s price-earnings ratio to the industry average, the stock currently looks expensive. In this case, I used the Price/Earnings (PE) ratio since there is not enough information to reliably predict the stock’s cash flow. I find Trinity Industries’ ratio of 32.06x to be higher than its average of 18.48x, suggesting the stock is trading at a higher price relative to the machinery industry. But is there another opportunity to buy cheap in the future? Since Trinity Industries’ stock price is quite volatile, this could mean that it may go down (or up even more) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator of how the stock is doing relative to the rest of the market.
Can we expect growth from Trinity Industries?
Investors looking for portfolio growth may want to consider a company’s prospects before buying its stock. Buying a big company with solid prospects at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. With profits expected to more than double over the next two years, the future looks bright for Trinity Industries. It seems that a higher cash flow is expected for the stock, which should translate into a higher valuation of the stock.
What this means for you
Are you a shareholder? TRN’s bullish future growth appears to have been factored into the current share price, with the shares trading above industry price multiples. At this current price, shareholders may ask a different question: should I sell? If you think TRN should be trading below its current price, selling at a high price and buying it back when its price drops towards the industry PE ratio can be profitable. But before making this decision, see if its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on TRN for a while, now might not be the best time to get into the stock. The price has outpaced its industry peers, which means there are likely to be no more benefits from poor pricing. However, the optimistic outlook is encouraging for TRN, which means that it is worth digging into other factors in order to take advantage of the next price drop.
In light of this, if you want to do more analysis on the company, it is essential to be aware of the risks involved. Our analysis shows 3 warning signs for Trinity Industries (2 are potentially serious!) and we strongly recommend that you consult them before investing.
If you are no longer interested in Trinity Industries, you can use our free platform to view our list of over 50 other stocks with high growth potential.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.