How High Can Cooper Tire Fly?

Shares of Cooper Tire & Rubber (NYSE: CTB  ) hit a 52-week high yesterday. Let's look at how it got here and whether clear skies are ahead.

How it got here
After a few years of strong recovery, the car industry has sputtered in recent quarters as the economy can't seem to get a firm footing. But, Cooper Tire is firing on all cylinders and is hitting new highs after crushing earnings estimates in the second quarter, continuing its strong operational growth.

Revenue jumped 15% in the second quarter to $1.06 billion and, despite the weak economy, the Americas drove the way by bumping sales up 16%.

What has been most impressive about Cooper Tire's move higher is that competitors and original equipment manufacturers for cars aren't following the same path. Goodyear Tire & Rubber (NYSE: GT  ) saw sales decline last quarter and Ford (NYSE: F  ) and General Motors (NYSE: GM  ) did as well and their stocks have been pretty stagnant as a result.

CTB Chart

CTB data by YCharts

Below are the metrics that illustrate Cooper Tire's great performance. Only Ford can beat it in profit margin, and Cooper crushes everyone else in growth.

  Price/Book Quarterly Revenue Growth Profit Margin Forward P/E
Cooper Tire 2.1 15.2% 7.2% 7.5
Goodyear 7.2 (8.4%) 1.3% 5.3
Ford 2.3 (6.5%) 13.3% 6.8
General Motors 1.2 (4.5%) 3.0% 5.8

Source: Yahoo! Finance

Even with all of this the company still trades at a P/E ratio below eight, a good value if growth can continue.

What's next?
Cooper Tire obviously has performed very well over the past year, but to think it can keep outperforming rivals by such a wide margin is asking too much. In the quarterly conference call management was very concerned about the overall economic environment -- that overhang will be a drag on the company going forward. Raw material costs are also having an effect on margins.

I think the stock can continue to outperform the market given the current margin level and growth, but not at the same level it has for the past year. The CAPS community isn't convinced it will outperform at all, giving the stock a three-star rating. Let us know what you think about Cooper Tire in the comments section below.

Interested in reading more about Cooper Tire & Rubber? Click here to add it to My Watchlist for ongoing updates. Likewise, if you're interested in Ford, as a shareholder or potential investor, download our new premium report. One of our top equity analysts has compiled a premium research report with in-depth analysis on whether Ford is a buy right now, and why. Simply click here to get instant access to cutting-edge research.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

The Motley Fool owns shares of Ford Motor. Motley Fool newsletter services have recommended buying shares of General Motors and Ford Motor. Motley Fool newsletter services have recommended creating a synthetic long position in Ford Motor. 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.


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Related Tickers

8/29/2014 4:01 PM
CTB $30.83 Up +0.46 +1.51%
Cooper Tire & Rubb… CAPS Rating: *****
F $17.41 Down -0.01 -0.06%
Ford CAPS Rating: ****
GM $34.80 Up +0.12 +0.35%
General Motors CAPS Rating: **
GT $25.97 Up +0.20 +0.78%
The Goodyear Tire… CAPS Rating: ***

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