Timken's Rapidly Improving Earnings Should Drive Stock Gains

| About: Timken Co. (TKR)

The market opened down on Friday, despite a decent jobs report that contained upward revisions to the two previous jobs reports. It is on days like these that I take out my shopping list and pick up shares on the cheap. One stock on my radar these days due to its low valuations and rapidly growing earnings is Timken (NYSE:TKR).

“The Timken Company develops, manufactures, markets, and sells anti-friction bearings and related products and steel products primarily in the United States and Europe.” (Business description from Yahoo Finance).

Eight reasons Timken is a buy at $43 a share:

  1. It is selling near the bottom of its five-year valuation range based on P/E and P/CF
  2. It has beat earnings estimate five of the last six quarters. It average beat over consensus over the last four quarters has been almost 11%.
  3. Insiders bought new shares in Timken in August.
  4. Consensus estimates on Timken show rapid earnings growth. It made $2.95 a share in FY2010 is expected to make $4.56 in FY2011 and $5.16 in FY2012.
  5. Timken has a five year projected PEG of just .53 which is an over 35% discount to its five year average.
  6. It is selling for less than 1 times sales and has a forward PE of under 9 which is a 50% discount to its five year average.
  7. Timken offers a strong balance sheet and yields almost 2%
  8. It is selling under analysts’ price targets. The median analysts’ price target on TKR is $61, William Blair upgraded the stock in late September and Longbow has a price target of $55 on Timken.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TKR over the next 72 hours.