A Red-Hot Containerboard Stock

NEW YORK ( TheStreet) -- Trimas Corporation ( TRS) is a manufacturing and distribution company that has been performing very well lately and has caught my eye. Trimas manufactures engineering components for the aerospace and oil industries, towing industries, and it manufactures containers for the packaging industry.

Container stocks like Packaging Corp. of America ( PKG) and Rock Tenn Co. ( RKT) have been some of the hottest stocks in the market of late.

Here is a one year chart of Packaging Corp. of America:

The stock is up 83.7% over the last 12 months and has averaged an average annual return of 32.5% over the last three years.

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When I compare the overall performance of PKG against the other 3,403 stocks that I rank on a daily basis it earns a grade of "A-".

Now let's look at the chart and performance of another containerboard stock:

Rock-Tenn is up a whopping 94.7% over the last 12 months. It has been one of the hottest stocks in the entire market.

Data from Best Stocks Now App

Rock-Tenn earns a current performance grade of "A". As you can see, the containerboard stocks have been and are currently some of the best performing stocks in the market.

Trimas is a conglomerate corporation that has acquired many smaller companies in order to more effectively design, produce and distribute products to consumers and to the industries that I listed above.

But one of the biggest divisions of Trimas is the packaging sector that makes containers for household, food, cosmetic, medical and industrial products. Tied to that is a division that distributes high and low pressure cylinders to oil and gas sites.

The other division focuses on fasteners, trailer hitches, sealing products, gaskets and other important components for planes, trucks, and oil rigs. These have also been good sectors in the economy of late.

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.

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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.

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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.

To narrow it down even further, I next let the one-year stock chart be my final arbiter.

As you can see from the above chart, the stock just recently broke out of a four-month consolidation and has hopefully begun a new uptrend.

The stock passes my performance test, my valuation test and the stock chart looks great.

Of the 3,403 stocks I track, Trimas comes in at number 91 and earns an overall grade of "A-". Clients of Gunderson Capital Mgt. with an aggressive growth risk profile are currently long the stock.

Data from Best Stocks Now App

This article was written by an independent contributor, separate from TheStreet's regular news coverage.