Take This Train to Financial Gain

Railcar manufacturer Trinity Industries (NYSE: TRN  ) jumped last month after a strong earnings report. The stock still has done well since, but has yet to approach its highs of earlier this year. Investors want to know whether this industrial pick can keep rising. Let’s see if it has what it takes to fill your portfolio’s needs.

A nice rebound
Trinity manufactures railcars, barges, wind turbines, and associated industrial. While the recession hammered the company’s stock price and devastated its sales -- indeed, Trinity bears a sales growth rate of -0.9% over the last five years -- the company has rebounded since, particularly in recent quarters. Trinity currently sports a year over year quarterly revenue growth of more than 45%.

Digging into the company’s filings reveals a strong commitment to maintaining this trend. Trinity’s backlog of orders jumped more than 23% in its most recent quarter from a year ago. It now stands at more than $4 billion in future orders -- a huge chunk of which stems from the company’s core rail group, which boasts more than $3 billion in backlog. Given the cyclical nature of its industry, Trinity has a nice safety cushion to potentially fall back on should future demand take a hit.

Although you should watch for an economic downturn that would certainly lower this outlook and likely defer these orders, Trinity’s development of future revenue streams spells good things for the company if the economy continues to improve.

Competition on rails
Trinity has more than just railcar products in its diversified array of manufacturing. Still, it’s worth it to compare the company’s financial data against its railcar-producing peers to see whether or not Trinity competes successfully for your investment dollars.

Company

P/E

Operating Margin

Long-term Debt/Equity

Return on Equity

Trinity 10.8 12.9% 1.5 10.6%
American Railcar Industries (Nasdaq: ARII  ) 17.8 11.6% 0 10.8%
FreightCar America (Nasdaq: RAIL  ) 10.7 4.8% 0.92 10.5%
Greenbrier Companies (NYSE: GBX  ) 7.6           6.2% 1.0 16.2%

Source: Yahoo! Finance and Motley Fool CAPS

Trinity is considerably larger than the others by market cap -- Trinity’s $2.2 billion cap greatly surpasses its small-cap railcar rivals, giving it flexibility in the size matters manufacturing sector. The company’s $1.3 billion total revenue from its rail division alone-- (a 144% year-over-year gain --  tops the market cap of all three competitors.

While the cheap P/E might speak, at first, of undervaluation, the industry’s cyclical nature needs to be factored in. Investors are concerned about a dip  in the economy, which would hammer Trinity’s bottom line, and must factor that possibility  into any  view of Trinity’s future.

Overall, you shouldn’t expect Trinity to deliver insane returns, but the manufacturer offers stability for your portfolio. With domestic manufacturing averaging healthy growth since the recession, continued economic recovery will lead Trinity and its shareholders to profit.

Stable stocks like Trinity give you confidence in your portfolio to beat a fickle market’s volatility. If you want to secure your financial freedom with some stable, sure-fire picks, check out The Motley Fool’s free report, “Secure Your Future With 9 Rock-Solid Dividend Stocks.”

Fool contributor Dan Carroll holds no positions in the stocks mentioned in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2002688, ~/Articles/ArticleHandler.aspx, 4/24/2014 12:53:44 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement