David Allen
Long/short equity, deep value, value, growth

Westinghouse Air Brake Technologies Corporation: A Derailment Ahead?

Westinghouse Air Brake Technologies Corporation (NYSE:WAB), known to many as Wabtec, has been hurtling down the track at full throttle: its stock has risen from $49.38 on October 4, 2011, to recently trade above $87.00. Yet, just as Wabtec's brakes slow trains, economic realities will likely ease back the throttle and apply the brakes to the Wabtec locomotive.

The graph below summarizes Wabtec's share price over the past two years:

(click to enlarge)

High Multiples

Wabtec has had a great 2012. In the first nine months, revenue grew $348 million (24.3%) over the comparable 2011 period. Estimated sales for 2012 are $2.39 billion, up 21.7% from 2011's $1.97 billion.

At $87, the market is expecting future earnings and...

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