Yahoo Finance At US$30.75, Is It Time To Put Trinity Industries, Inc. (NYSE:TRN) On Your Watch List?
While Trinity Industries, Inc. (NYSE:TRN) might not have the largest market cap around , it saw a significant share price rise of 27% in the past couple of months on the NYSE. The recent jump in the share price has meant that the company is trading at close to its 52-week high. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Trinity Industries’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Trinity Industries
What's The Opportunity In Trinity Industries?
According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Trinity Industries’s ratio of 17.99x is trading slightly below its industry peers’ ratio of 22.38x, which means if you buy Trinity Industries today, you’d be paying a decent price for it. And if you believe Trinity Industries should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Trinity Industries’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Trinity Industries look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Trinity Industries, it is expected to deliver a negative earnings growth of -4.6%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? Currently, TRN appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on TRN, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on TRN for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on TRN should the price fluctuate below the industry PE ratio.
If you want to dive deeper into Trinity Industries, you'd also look into what risks it is currently facing. Case in point: We've spotted 4 warning signs for Trinity Industries you should be mindful of and 1 of them is a bit concerning.
If you are no longer interested in Trinity Industries, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
