Trinity Industries Inc. (TRN) sells and leases railroad products and railcar maintenance services in North America. The company operates under the name TrinityRail in three main segments: Railcar Leasing and Management Services Group, Rail Products Group, and All Other.
The company is seeing weak performance in its Rail Products Group due to low railcar deliveries and fewer railcars sold. TRN was negatively affected by the pandemic, as disruptions hurt railcar demand, which weighed on lease rates.
While the company’s cash balance of $178 million is low, its current ratio of 2.9 indicates it has enough liquidity to handle short-term obligations. Unfortunately, though, the company has a negative profit margin.
Revenues are down an average of 21.4% over the past five years and analysts forecast sales will be down 13.5% year over year this quarter. Earnings, though, are expected to soar 350%. The stock is highly overvalued with a trailing P/E over 1,000 and a forward P/E of 49.75. Performance has been mixed since March as shown in the chart below.
Take a look at the 1-year chart of TRN below with added notations:
Chart of TRN provided by TradingView
After peaking back in March, TRN has fallen into a sideways trading range. While in the range, the stock has formed a resistance level at $30 (red), and an area of support at around $26.7 (green). TRN has just stalled at $30 again, but at some point, the stock will have to either break the resistance or the support.
TRN is trading within a range. The possible long positions on the stock would be either on a pullback to $26.7 or on a breakout above $30. The ideal short opportunity would be on a break below $26.7.
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TRN shares were unchanged in premarket trading Wednesday. Year-to-date, TRN has gained 12.97%, versus a 13.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing. More...
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