Please ensure Javascript is enabled for purposes of website accessibility

Why Chart Industries, Inc. Stock Was Up 14% Last Month

By Jason Hall - Dec 8, 2015 at 7:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Mister Market saw some value, but tax-loss selling has brought Chart back to earth.

What: Shares of cryogenic gas processing equipment maker Chart Industries (GTLS -5.89%) have been on a steady decline for more than a year. But in November, things took a turn for the better, and the company's stock picked up nearly 14%:

GTLS Chart

GTLS data by YCharts.

Unfortunately, Mr. Market -- the fickle guy that he is -- has turned his back again, and Chart's stock is down more than 14% one week into December, putting early November's investors back where they started. 

So what: The short version is this: Chart has some significant exposure to the energy business, since it makes equipment used to process and liquefy natural gas. Because of this, Chart was hyped as a great growth stock tied to the U.S. energy boom, but so far that growth hasn't materialized, with China (expected to be a huge demand market) showing some growth weakness, and softening expectations for demand in the rest of Asia for natural gas. 

And while this is an important part of Chart's business, the company's existence isn't at stake like many others out there. The company is on track to earn around $1 to $1.10 per share in profits this year, according to the company's third-quarter earnings release. 

Now what: Over the past several months, Chart's stock has moved into what seems like real value territory to me:

GTLS PE Ratio (TTM) Chart

GTLS P/E Ratio (TTM) data by YCharts.

I think even after the December sell-off took away November's gains, Chart stock is trading at a relative discount to the value of its business. With that said, it's not completely risk-free, and the stock could drop more. But long-term, there's a lot to like. 

2016 could be a slightly more challenging business environment than in 2015, but Chart's management has already taken steps to prepare for that. The company has closed production facilities and reduced headcount to put the company operationally more in line with the demand environment, reducing both fixed costs and giving the company some financial flexibility. 

In summary, Chart's stock could go sideways over the next year or so, since the business is tied to energy to a not-small extent. But from a long-term perspective, the company -- that is, the business itself -- is relatively stable, the balance sheet isn't over-leveraged (around $219 million in debt), and it produces steady positive cash flows. 

Add it all up, and now's probably a good time to buy shares of Chart Industries. It may not give you market-crushing returns overnight, but it's a solid business on sale at a reasonable price right now. 

Jason Hall owns shares of Chart Industries. The Motley Fool owns shares of and recommends Chart Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Chart Industries, Inc. Stock Quote
Chart Industries, Inc.
GTLS
$195.87 (-5.89%) $-12.27

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
402%
 
S&P 500 Returns
129%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.