Titan International (TWI): Buy, Sell, or Hold Post Q4 Earnings?

TWI Cover Image

Titan International has been treading water for the past six months, recording a small loss of 3.7% while holding steady at $7.29.

Is now the time to buy Titan International, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

Why Do We Think Titan International Will Underperform?

We don't have much confidence in Titan International. Here are three reasons there are better opportunities than TWI and a stock we'd rather own.

1. Revenue Growth Flatlining

Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. Titan International’s recent performance shows its demand has slowed as its revenue was flat over the last two years. Titan International Year-On-Year Revenue Growth

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 Titan International, its EPS declined by 46.7% annually over the last two years while its revenue was flat. This tells us the company struggled to adjust to choppy demand.

Titan International Trailing 12-Month EPS (Non-GAAP)

3. New Investments Fail to Bear Fruit as ROIC Declines

We like to invest in businesses with high returns, but the trend in a company’s ROIC can also be an early indicator of future business quality.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Titan International’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Titan International Trailing 12-Month Return On Invested Capital

Final Judgment

We see the value of companies helping their customers, but in the case of Titan International, we’re out. That said, the stock currently trades at 160× forward P/E (or $7.29 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better stocks to buy right now. We’d recommend looking at a dominant Aerospace business that has perfected its M&A strategy.

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