Terex Corp (TEX, Financial) experienced a daily loss of -7.36% and a three-month loss of -24.55%, with an Earnings Per Share (EPS) (EPS) of 6.52. This raises the question: is Terex (TEX) modestly undervalued? Our valuation analysis aims to answer this question. We invite you to delve into the following analysis for a comprehensive understanding of Terex's market position.
Company Snapshot
Terex is a global manufacturer of aerial work platforms, materials processing equipment, and specialty equipment, such as material handlers, cranes, and concrete mixer trucks. The company's current composition is a result of numerous acquisitions over several decades and a recent shift to focus on its two core segments after divesting a handful of underperforming businesses. Terex's remaining segments see heavy demand in nonresidential construction, maintenance, manufacturing, energy, and materials management.
Terex's stock price stands at $50.24, while its fair value (GF Value) is estimated at $58.2. This comparison suggests that Terex might be modestly undervalued. The following sections will provide a deeper understanding of Terex's valuation through a financial lens, coupled with crucial company details.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value. The GF Value Line on our summary page provides a snapshot of the stock's fair trading value. It is computed based on three factors:
- Historical multiples at which the stock has traded.
- A GuruFocus adjustment factor based on the company's past performance and growth.
- Future estimates of business performance.
The GF Value Line represents the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return is expected to be higher.
According to GuruFocus Value calculation, Terex (TEX, Financial), with its current price of $50.24 per share and a market cap of $3.40 billion, appears to be modestly undervalued. Given this undervaluation, the long-term return of Terex's stock is likely to be higher than its business growth.
These companies may deliver higher future returns at reduced risk.
Financial Strength
Investing in companies with poor financial strength can lead to a higher risk of permanent capital loss. Thus, it is crucial to review a company's financial strength before investing. Terex has a cash-to-debt ratio of 0.4, which is worse than 55.98% of 209 companies in the Farm & Heavy Construction Machinery industry. GuruFocus ranks Terex's overall financial strength at 7 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. Terex has been profitable 8 out of the past 10 years. Over the past twelve months, the company had a revenue of $5 billion and Earnings Per Share (EPS) of $6.52. Its operating margin is 12.04%, which ranks better than 78.95% of 209 companies in the Farm & Heavy Construction Machinery industry. Overall, Terex's profitability is ranked 7 out of 10, indicating fair profitability.
Growth is probably the most important factor in a company's valuation. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Terex is 1.6%, which ranks worse than 64.22% of 204 companies in the Farm & Heavy Construction Machinery industry. The 3-year average EBITDA growth rate is 7.5%, which ranks worse than 53.04% of 181 companies in the same industry.
Another way to assess a company's profitability is to compare its return on invested capital (ROIC) and the weighted cost of capital. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. For the past 12 months, Terex's ROIC is 22.15, and its WACC is 13.02.
Conclusion
In conclusion, Terex (TEX, Financial) appears to be modestly undervalued. The company's financial condition and profitability are fair, but its growth ranks worse than 53.04% of 181 companies in the Farm & Heavy Construction Machinery industry. To learn more about Terex stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
