Titan Machinery (NASDAQ:TITN) is among those stocks that had generated significant share price appreciation in the last twelve months, supported by an improving market environment for machinery makers. Titan’s stock soared 48% in the last three months and surged almost 66% in the last one year. Its stock is currently trading around $23 a share, which is the highest level in the last 52-weeks.
The company has a market capitalization of $511 million and the recent gains in its share price have provided a gain of 31.56% over SMA 50.
Analysts believe that the rally in TITN share price offers the perfect selling opportunity due to the fact that TITN’s stock price has reached the price target and the stock looks overvalued considering its financial numbers and valuations.
The rally in Titan’s stock was only due to improving market fundamentals for machinery makers. Titan Machinery is engaged in retail sale, service, and rental of agricultural and construction machinery. In the latest quarter, the company’s equipment revenue increased only 1.8%, compared to the prior year’s quarter. On the negative side, Titan’s parts revenue slid 6.6% to $64.7 million, relative to the same period last year.
Aside from international revenue, Titan’s revenue from agriculture and construction segments declined 9.25% and 9.78%, respectively, over the past year period.
Moreover, Titan Machinery also presented a bleak outlook for the full year. Its agriculture sales are likely to decline by 10% this year, while construction sales were also expected to dip by 10% from FY2017.
Titan’s cash generation potential is also not enough to cover the capital investments. In the latest quarter, Titan’s operating cash flows were standing at negative $11 million and free cash flows were at negative $17 million. This means the company’s internal cash generation potential is insufficient to cover its capital requirements. Thus, the company has to depend on debts and external borrowing to invest in growth opportunities.
Overall, the rally in its share price was only supported by broader growth in machinery stocks, amid the improving outlook for infrastructure activities and agricultural sector. Therefore, analysts are suggesting to investors to capitalize on the recent gains by selling the stock trading around 52-weeks.
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