Titan Machinery: More Big Gains on the Way

Titan Machinery (TITN) operates 34 agricultural/construction equipment stores and two outlets offering new/used tractors and other machinery. Business couldn’t be better as this company continues to add to its portfolio of businesses with the most recent acquisition coming on 5/12 with a purchase of Mid-Land Equipment, a construction equipment dealer with 2007 revenues of $48.3 million. The terms of the deal were not disclosed.

However, the information that is disclosed on the company indicates that this could be a fantastic long-term stock.

As we all know earnings are the most important driver of a stock price. When it comes to TITN’s earnings, they simply don’t get much better with the last six quarters' EPS growth coming in at 20%, 100%, 60%, 60%, 250%, and 109% the past six quarters.

Sales have been even more impressive with growth the past eight quarters' improving by 13%, 13%, 39%, 47%, 28%, 28%, 67%, and 61%.

That growth in EPS and sales is extremely powerful and to see them both rise in the two most recent quarters after such strong growth already is a very bullish development that I will continue to monitor. The estimates for 2009 are for a gain of 32% and for 2010 are for a gain of 18%. As long as TITN's business continues to do well, estimates should be raised in the future, especially with a 73% growth rate, a ROE of 18%, a cash flow of $0.78 and an EPS of $0.23 for the most recent quarter.

Debt is only 19% of the shareholder equity, earnings stability is 18, and the p/e ratio is a high 41 but that is actually a bullish number as the best growth stocks always carry higher p/e ratios as funds buy the stock based on future EPS earnings estimates and not on current earnings.

In Investors Business Daily the ratings don’t get much better with an EPS rating of 99, a RS rating of 99, a group RS rating of 84, an SMR rating of A, an Acc/Dis rating of C+, a composite rating of 97, a timeliness rating of A, and a sponsorship rating of D.

Despite the mutual fund sponsorship being a D, funds are still finding ways of adding this stock to their holdings as mutual fund ownership has increased from 11 funds to 14 taking a stake in this huge growth machine.

This stock is best bought on pullback to the 50-day moving average but I am a little bit more aggressive and will look to add to this gem with a heavy volume breakout from its current ascent.

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Disclosure: Long TITN

Comments

[Darvas:]

Great analysis Joshua. I'm a new gold subscriber to your site and the amount of actionable information I"m getting has already paid for my subscription. I'm glad to see that you're on Seeking alpha as well!

2008 Jun 13 11:40 AM

[lonestar:]

Great read Joshua... I started buying TITN in the 17's and have been adding since. This is a no-brainer at this point. The sector is hot and with farmers doing more planting and making good profits, they are finally able to buy the ag equipment they have needed. Thanks for the work on this article

2008 Jun 13 11:55 PM