Titan Machinery (TITN): Buy, Sell, or Hold Post Q3 Earnings?

January 09, 2025 at 04:08 AM EST

TITN Cover Image

Over the last six months, Titan Machinery’s shares have sunk to $13.91, producing a disappointing 7.3% loss - a stark contrast to the S&P 500’s 6.1% gain. This may have investors wondering how to approach the situation.

Is there a buying opportunity in Titan Machinery, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Despite the more favorable entry price, we're swiping left on Titan Machinery for now. Here are three reasons why there are better opportunities than TITN and a stock we'd rather own.

Why Is Titan Machinery Not Exciting?

Founded in 1980, Titan Machinery (NASDAQ: TITN) is a distributor of agricultural and construction equipment across the United States and Europe.

1. EPS Took a Dip Over the Last Two Years

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

Sadly for Titan Machinery, its EPS declined by 39.9% annually over the last two years while its revenue grew by 14.4%. This tells us the company became less profitable on a per-share basis as it expanded.

Titan Machinery Trailing 12-Month EPS (Non-GAAP)

2. Free Cash Flow Margin Dropping

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

As you can see below, Titan Machinery’s margin dropped by 5.8 percentage points over the last five years. It may have ticked higher more recently, but shareholders are likely hoping for its margin to at least revert to its historical level. Almost any movement in the wrong direction is undesirable because of its already low cash conversion. If the longer-term trend returns, it could signal it’s becoming a more capital-intensive business. Titan Machinery’s free cash flow margin for the trailing 12 months was negative 2.1%.

Titan Machinery Trailing 12-Month Free Cash Flow Margin

3. Short Cash Runway Exposes Shareholders to Potential Dilution

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Titan Machinery burned through $57.65 million of cash over the last year, and its $1.22 billion of debt exceeds the $23.42 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the Titan Machinery’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Titan Machinery until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

Final Judgment

Titan Machinery isn’t a terrible business, but it isn’t one of our picks. Following the recent decline, the stock trades at 13.1× forward EV-to-EBITDA (or $13.91 per share). This multiple tells us a lot of good news is priced in - we think there are better stocks to buy right now. We’d recommend looking at Uber, whose profitability just reached an inflection point.

Stocks We Would Buy Instead of Titan Machinery

The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market to cap off the year - and we’re zeroing in on the stocks that could benefit immensely.

Take advantage of the rebound by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,691% between September 2019 and September 2024) as well as under-the-radar businesses like Comfort Systems (+783% five-year return). Find your next big winner with StockStory today for free.

About Us

About Cabling Installation & Maintenance

Contact Cabling Installation & Maintenance

Editorial

Advertising and Sponsorship Sales

Subscriptions and Memberships

Feedback/Problems