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Strategies & Market Trends : Value Investing
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To: E_K_S who wrote (55589)7/1/2015 6:15:23 PM
From: Graham Osborn1 Recommendation

Recommended By
E_K_S

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I dunno EKS, I’m loving TRN less on second look. That of course is the herd mentality after a big drop for a cyclical, but then if everyone else feels the same way it might come true:



I guess I’m downplaying the guardrail investigation as a price driver c/w industry sentiment:



As far as the margin of safety, I’m being conservative and (1) assuming the $663M will be paid in full (2) assuming with class action and other payments net cost could round up to 1B. With tangible book at 2.4B, that leaves 1.4B or $9/ sh. As to earnings, TRN’s growth was primarily driven by the energy boom, which should have some tail whatever the long-term pricing outlook. If they get a bump from the railcar replacement rules that’s upside. But I don’t see it as reasonable to assume earnings will continue to grow at comparable rates for the next 5 years, and they may well fall given they have a lot of CapEx baggage built in. So I’m taking last 5-year average EPS of $1.90 to factor in some tail but keep my MOS. So my GN is $20/ sh. And if the business really hit the tubes I’d accept tbook of $9/ sh. That’s being a bit generous in a downturn:



Anyway, I’ll keep on eye on it and maybe pick some up if it shows decent support around $20 for a month or 2. But as for GHM I'll have a short trigger.
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