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Titan International could rise 20%: Barron's

  • "Rubber prices are likely to stabilize this year, and demand among construction customers could improve," David Englander writes, predicting a rebound in beaten down shares of Titan International (TWI).
  • With TWI trading at just 5X EV/EBITDA, it shouldn't "take much improvement" in the operating environment to spark a recovery, Barron's notes.
  • As for the company's perspective, management reportedly believes "a turn in demand [for the construction business] is near as customers' inventory levels are worked down."
  • "Spinning off or selling the mining business also could help TWI's fortunes," Englander notes.
Comments (3)
  • not an expert on this industry, but Michelin looks much more attractive than TWI just based on a glance at the financials. Michelin is more profitable and sells at a much lower valuation: a p/e of 12 vs. TWI's p/e of 22, and Michelin pays a 3% dividend vs. TWI's dividend of two pennies a year. Michelin's ROE is 13.1% vs. TWI at 8%. Michelin has a much stronger balance sheet with debt at 22% of total capital: TWI is highly levered with debt at 51% of capital.
    All data taken from Financial Times tear sheets. No positions, except for the Michelin tires on my car.
    12 Jan, 07:49 AM Reply Like
  • Don't know much about Michelin, but I would add that Titan's results are somewhat skewed by a poor 4th quarter last year, in which they earned nothing. So current valuations are essentially based off 3 quarters results. Will this quarter be the beginning of rubber/construction stabilization? Who knows. But they will earn noticeably more in the quarter compared to the crappy 4th quarter last year so metrics will look better.
    12 Jan, 02:28 PM Reply Like
  • Titan is a niche player versus Michelin. Also look at EBITDA multiples, not P/E. Titan is working on consolidating all their acquisitions and getting most out of the synergies. They also have their new tire reclamation business which could be an incremental 100mm+ in EBITDA.
    12 Jan, 05:25 PM Reply Like
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