Shares of Titanium Metals (NYS: TIE) hit a 52-week low yesterday. Let's look at how it got here and whether clouds are ahead.
How it got here
When you're making high-performance metals, a weak global economy isn't good for your business. Lay on top of that a constant delay for the one product that could have a huge impact on industry demand, and you have conditions ripe for a falling stock. The product I'm talking about is of course the often-delayed Boeing (NYS: BA) 787 Dreamliner, which is now in production but may not hit target levels of production for some time.
The general downtrend hasn't been limited to Titanium Metals, either. Specialty metals suppliers Allegheny Technologies (NYS: ATI) and Carpenter Technology (NYS: CRS) have seen their stocks fall as well.
Despite the falling stock price, Titanium Metals hasn't been performing poorly. The company has hit earnings estimates three of the last four quarters and profits are expected to grow by about a third next year. Profit margins and return on assets are also stronger than competitors as you can see in the table below.
Return on Assets
Source: Yahoo! Finance.
What the specialty metals industry really needs is an improvement in the economy and Boeing to hit its production targets. If that happens, this may become a high-performing stock again.
The economy will likely continue to be a drag for some time, both here and in Europe, so I'm not eager to jump into Titanium Metals today. However, long term I do like the role that high-performance materials will play as products become more demanding and require a higher specification.
The CAPS community is much more eager about the future than I am, giving the stock our highest five-star rating. More than 2,500 players think the stock will outperform the market versus just 90 who think it will underperform. That's strong conviction from our community of investors.
The near-term performance depends largely on the economy, but keep an eye on the airline industry as well. This is where a large percentage of titanium demand comes from, and Titanium Metals needs it to be strong to improve performance.
At the time this article was published Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Motley Fool newsletter services have recommended buying shares of Titanium Metals. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.