The Growth Stock – Terex Corp
Priced on 14.6 times forecast earnings (18.6 times historic) with historic annual EPS growth of 45.7% and forecast growth of 23.1%, Terex Corp (TEX) looks cheap for a stock on the verge of a cyclical upswing. Especially when peers such as the Manitowok Company are priced on a multiple of around 31 with similar growth prospects.
The company manufactures and services aerial platforms, excavators, dumper trucks and concrete mixers for the construction industry as well as a full range of cranes for ports and construction.
Earnings fell off a cliff in 2009 as the great recession took hold and construction work seized up. Revenue fell from $9.9 billion to $4.0 billion and the company reported big losses in 2009 and 2010. However revenues have been growing steadily since then and reported net income has grown from $45 million to $356 million over the past 12 months. Earnings per share forecasts show this trend is expected to continue with forecast EPS growth of 23.1%.
The outlook has been boosted by two main factors. First, forecast growth in the construction industry looks set to accelerate. While institutional demand has been a drag on the overall number and is expected to fall 0.1%, the demand for new retail stores and shopping malls is expected to grow by 9.9% driving overall expected growth of 4.9%.
Second, Terex has been a pioneer in automating port logistics which offers huge benefits for terminal operators through lowering wage costs and optimizing utilization of existing stack areas. Consequently Terex is well placed to benefit from a growing number of fully automated ports which is forecast to increase from 10 today to 50 in a decade.
If Terex can continue to deliver as it has done and is forecast to, it should see significant multiple expansion and price appreciation. (read full analysis)
The Value Stock - EBIX
Buying a stock at a low valuation multiple usually means there is a bit of history to get comfortable with and EBIX (EBIX) is no exception. Software company EBIX has been growing revenues and earnings at a rate of around 20% and 10% respectively for the past five years due to organic growth and a number of acquisitions. That was until the stock price fell off a cliff last year as negative reports of financial irregularities were published and a planned merger with Goldman Sachs was canceled. Since then the stock has traded in a range between $9 and $18 with a current PE of 9.41.
However in June the District Court dismissed the case following the Court's preliminary approval of the settlement announced by the Company on February 6, 2014. EBIX Chairman and Chief Executive Officer Robin Raina commented, "We are pleased to have put this litigation behind us and look forward to moving ahead with our long-term business development strategy."
Things look to be getting back to normal at EBIX as the company again begins to ramp up business. Revenue and earnings stalled in 2013 as the company focused on legal challenges. That should now change as the company again focuses on growing the company with two acquisitions already completed this year (HealthcareMagic and CurePet) and lower legal expenses required going forward.
Additionally the company announced a $100 million stock buyback which should provide a meaningful boost to EPS given the current market cap of $540 million.
While EBIX is not yet fully in the clear, a lot of bad news still seems to be priced in the current valuation despite the recent settlement. (read full analysis)
Insider Activity – Consumer Portfolio Services
Director Greg Washer bought has bought 80,700 shares, in automobile financier Consumer Portfolio Services (CPSS), in several recent transactions at prices between $6.50 and $7.24. On August 7 he was joined by Director Daniel Wood who purchased 14,000 at $7.03.
The move follows second-quarter earnings released in July which reported net income of $7.0 million compared to $4.8 million the previous year as revenues increased by a whopping 20% to $71.6 million. The company has seen a recent water change in sentiment in the industry as it has closed its second securitization in June and 13th since April 2011. Additionally the rating of the most senior tranches was upgrade during the quarter to AAA providing access to cheaper funding.
The outlook for the company appears bright with consensus EPS forecast of $0.88 for December 2014 and $1.04 for 2015. In July Compass point initiated coverage with a “buy” ratings and a target price of $10. Current stock price $7.19. (read full analysis)
The author is a blogger for SurgingEarnings.com
Risk Disclaimer: This article does not constitute a recommendation to buy or sell. Investing in stocks or other securities and derivatives is a high risk activity and not suitable for everyone. It is strongly recommended that individuals should consult with a SEC registered investment adviser prior to making any investment decisions.
Disclosure: The author holds no positions in any of the stocks mentioned nor has any intentions to initiate any in the next 72 hours.