Garrett Motion (GTX, Financial) experienced a notable decline today, with its stock price dropping by 10.97% following the announcement of a secondary offering. This significant share increase in the market stirred investor concerns, leading to a sell-off. The stock is currently priced at $10.595.
Garrett Motion, which was originally part of Honeywell International, specializes in manufacturing turbochargers and components for internal combustion engines, hybrids, and electric vehicles. The company has undergone a bankruptcy and subsequent restructuring, ultimately returning to public markets with ownership mainly by private equity firms. Among these owners are Oaktree Capital Management, Centerbridge Partners, and Cyrus Capital Partners, who are gradually reducing their stakes. Recently, Garrett announced a 17 million share offering from these affiliates. Notably, Garrett will not receive direct financial benefits from this sale but has allowed the underwriter to repurchase up to $25 million worth of the stock being sold.
From a fundamental analysis perspective, Garrett Motion (GTX, Financial) presents a mixed valuation picture. The stock is deemed "Significantly Overvalued" based on its GF Value of $3.39, compared to its current market price. The company's market capitalization stands at approximately $2.15 billion, while its price-to-earnings (P/E) ratio is 8.21, close to its 1-year high. The stock's price-to-sales (P/S) ratio is also near its five-year high at 0.75.
Despite current valuation concerns, Garrett Motion showcases some financial strengths. Its Piotroski F-Score is a healthy 7, suggesting a robust financial position, and its Beneish M-Score indicates that the company is unlikely to be engaging in manipulative accounting practices. Furthermore, the company's operating margin is expanding, which is a positive indicator of profitability.
However, investors should note several warning signs. Garrett Motion's Altman Z-Score is 1.74, placing it in the distress zone, which implies a possibility of bankruptcy in the next two years. Additionally, revenue per share has been in decline over the last five years, indicating potential growth challenges.
In terms of liquidity, Garrett Motion's current ratio is 0.98, slightly below the industry median. The company's book growth over the past five years shows a promising increase of 42.1%, but it faces challenges with a negative net current asset value (NCAV) of -8.47 and a tangible book value of -4.38.
Given these factors, Garrett Motion (GTX, Financial) is positioned within a complex market environment, where significant valuation and financial strength factors must be weighed against potential risks.
