Despite robust performance in its last reported quarter, Terex’s (TEX) shares are down 20.1% in price year-to-date as the company struggles with supply chain disruptions and rising costs. However, given that it looks undervalued at its current price level, would it be worth betting on the stock now? Read on to learn our view.
Terex Corporation (TEX) in Westport, Conn., is a multinational manufacturer of materials processing gear and aerial work platforms. It creates, manufactures, and supports products used in construction, maintenance, manufacturing, energy, recycling, minerals, and materials management. The stock has gained 3.4% in price over the past month.
In terms of forward Non-GAAP P/E, the stock is currently trading at 9.26x, which is 43.1% lower than the 16.26x industry average. Also, its 0.70x forward EV/Sales is 56.8% lower than the 1.62x industry average. Furthermore, TEX’s 0.57x forward Price/Sales is 55.3% lower than the 1.28x industry average.
However, the company’s shares are down 35.1% in price over the past year and 20.1% year-to-date to close yesterday’s trading session at $35.14. While TEX is well-positioned for growth due to strong consumer demand, global supply chain disruptions and significant inflationary pressures due to the pandemic and geopolitical uncertainties are weighing on its operational performance.
Here is what could shape TEX’s performance in the near term:
TEX’s 1.36% trailing-12-month asset turnover ratio is 70.3% higher than the 0.8% industry average. Its trailing-12-month ROA and ROC are 46.3% and 56.4% higher than their respective industry averages. However, its 5.8% trailing-12-month net income margin is 14.5% lower than its 6.8% industry average. Also, its 19.1% trailing-12-month gross profit margin is 35.5% lower than the 29.6% industry average.
Consensus Rating and Price Target Indicate Potential Upside
Among 11 Wall Street analysts that rated TEX, seven rated it Buy, and four rated it Hold. The 12-month median price target of $51.18 indicates a 45.7% potential upside. The price targets range from a low of $38.00 to a high of $64.00.
POWR Ratings Reflect Uncertainty
TEX has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. TEX has a C grade for Stability and Quality. Its stock’s 1.52 beta is in sync with the Stability grade. In addition, the company’s mixed profitability is consistent with the Quality grade.
Among the 46 stocks in the A-rated Industrial – Building Materials industry, TEX is ranked #27.
Beyond what I have stated above, one can view TEX ratings for Growth, Value, Momentum, and Sentiment here.
TEX stock is down nearly 20% in price year-to-date despite the company posting solid earnings results in its last reported quarter. While the company’s strategic growth plans, investment in innovative products, and digital innovation will fuel its growth, persistent supply chain, labor, and logistical issues, and high costs may jeopardize its near-term prospects. So, we think investors should wait before scooping up its shares.
How Does Terex Corporation (TEX) Stack Up Against its Peers?
What To Do Next?
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TEX shares were unchanged in premarket trading Thursday. Year-to-date, TEX has declined -19.75%, versus a -13.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.