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TheStreet Open House

A Red-Hot Containerboard Stock

Stocks in this article: TRS RKT PKG

Trimas has been growing its earnings by an average rate of 31% per year over the last five years. It is expected to continue to grow at a rapid rate over the next five years. More on that in a bit.

Data from Best Stocks Now App

Now let's take a look at the performance of the stock. Trimas is a small-cap company that is good for investors who are looking for high-risk, high-reward investments.

Data from Best Stocks Now App

Let's compare the performance of this stock to the S&P 500. Because this stock has performed so much better than the S&P 500, the stock gets an "A-" grade. Here is why.

The stock averaged a total return of 37.8% over the last five years, while the S&P 500 has averaged just 3.7%.

Over the last three years the stocks has gone up at an average rate of 44.1%, while the market has averaged 14.3%. That is some serious alpha. Like the two previously mentioned containerboard stocks, Trimas has had a good 12-month run. It is up 74.3% over the last twelve months while the market is up 22.4%.

The company hasn't been around long enough for a 10-year average return, but it's certainly off to a good start!

While I like performance, I do not like to buy stocks based on that one criteria alone. I combine performance with value. I do not like to pay up for stocks. Valuation matters in a very big way.

Data from Best Stocks Now App

Trimas is currently trading at 13.46 forward earnings. With a growth rate of 30%, Trimas is still trading at a steep discount to its growth rate. It currently has a PEG ratio of 0.44.

I next take the company's earnings estimate and extrapolate them out over the next five years. I then apply a multiple that I believe is appropriate for the stock.

When I do this, I come up with a five-year target price of $65. With the stock currently trading at about $35 per share, the stock has just over 85% upside potential over the next five years.

I require 80% or better for a stock to meet my valuation criteria. Trimas currently meets this requirement.

Obviously, when you begin with 3,403 stocks and place a performance criteria on them, you really narrow down your universe. Furthermore, when you then place a valuation criteria the field really shrinks. I try to focus on the top 200 or so stocks in my universe at any given point in time.

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