Chart Industries: The Good, The Bad, And The Ugly

| About: Chart Industries, (GTLS)

Summary

The Good: The stock is still expected to grow earnings at a high clip.

The Bad: There is no dividend to speak of and the financial efficiency ratios have decreased.

The Ugly: The stock has been in a downward death spiral since mid-October 2013.

The last time I wrote about Chart Industries, Inc. (NASDAQ:GTLS) I stated, "Due to the lack of dividend, the downward trajectory of the technicals, and the bad market tape for high growth stocks, I will not be pulling the trigger here right now. But I do believe the time to purchase some more shares is approaching." After writing the article, the stock dropped 4.52% (but dropped as low as 9.39%) versus the 3.23% gain the S&P 500 (NYSEARCA:SPY) posted. Chart Industries is an independent global manufacturer of engineered equipment used in the production, storage and end-use of hydrocarbon and industrial gases.

On April 29, 2014, the company reported first-quarter earnings of $0.41 per share, which missed the consensus of analysts' estimates by $0.24. In the past year, the company's stock is down 26.1% and is losing to the S&P 500, which has gained 17.96% in the same time frame. Since initiating my position back on 14Aug13, I'm down 31.61%. With all this in mind, I'd like to take a moment to evaluate the stock on a fundamental, financial and technical basis to see if right now is a good time to purchase more of the stock for my growth portfolio.

Fundamentals

The company currently trades at a trailing 12-month P/E ratio of 29.22, which is fairly priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 17.96 is currently fairly priced for the future in terms of the right here, right now. The 1-year PEG ratio (0.96), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is inexpensively priced based on a 1-year EPS growth rate of 30.52%. The company has great near-term future earnings growth potential with a projected EPS growth rate of 30.52%. In addition, the company has great long-term future earnings growth potential with a projected EPS growth rate of 21.55%. Below is a comparison table of the fundamental metrics for the company when I wrote all articles pertaining to the company.

Article Date

Price ($)

TTM P/E

Fwd P/E

EPS Next YR ($)

Target Price ($)

PEG

EPS next YR (%)

26Mar14

81.29

31.27

19.15

4.24

63

1.05

29.75

27Apr14

75.29

29.07

17.68

4.26

63

0.97

29.90

01Jun14

71.89

29.22

17.96

4.00

60

0.96

30.52

Click to enlarge

Financials

On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company does not sport a dividend to speak of, but is sporting return on assets, equity and investment values of 5.5%, 10.7% and 9.7%, respectively, which are all respectable values. In this particular instance, I will skip the dividend aspect of the financials because the stock is in my growth portfolio, and in the growth portfolio a stock does not have to have a dividend. Below is a comparison table of the financial metrics for the company for when I wrote all articles pertaining to the company.

Article Date

Yield (%)

Payout TTM (%)

ROA (%)

ROE (%)

ROI (%)

26Mar14

N/A

N/A

5.9

11.5

11.9

27Apr14

N/A

N/A

5.9

11.6

9.7

01Jun14

N/A

N/A

5.5

10.7

9.7

Click to enlarge

Technicals

Click to enlarge

Looking first at the relative strength index chart [RSI] at the top, I see the stock in middle-ground territory with a current value of 43.4 and trending downwards. I will look at the moving average convergence-divergence [MACD] chart next. I see that the black line is above the red line with the divergence bars decreasing in height, indicating bearish momentum. As for the stock price itself ($71.89), I'm looking at the 50-day simple moving average (currently $75.32) to act as resistance and $61.25 to act as support for a risk/reward ratio, which plays out to be -14.8% to 4.77%.

Recent News

  1. The company agreed to terms with a Chinese company to supply equipment. Shandong Hanas New Energy is installing 50 permanent liquefied natural gas fueling stations and Chart will be receiving $35 million for the equipment supplied.

Conclusion

The company has been in a downward spiral since mid-October 2013 and has never been able to recover. There is no doubt I never pulled the ripcord in time and now I'm suffering for it. Fundamentally, the company is fairly priced based on next year's earnings estimate but is inexpensive on future growth potential while still expected to grow earnings at a high clip for the near- and long-term perspective. Financially, there is no dividend to hide out and the financial efficiency ratios have deteriorated. On a technical basis, there is huge risk for not as much reward right now. Due to the reduced earnings estimates for 2015, no dividend, and the deteriorating financial efficiency ratios, I'm not going to be pulling the trigger right now, there are better places to make money.

Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!

Disclosure: I am long GTLS, SPY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.