Why Sterne Agee Downgraded Triumph (TGI)

NEW YORK (TheStreet) -- Sterne Agee downgraded Triumph (TGI) to "neutral" from "buy" Thursday.

Triumph fell 1.2% to $67.59.

The analyst firm lowered the price target of the aircraft producer to $71 from $85. Sterne Agee said the change was a valuation call based on the company's growth prospects over the next few years.

Triumph recently reported earnings for its fiscal third quarter. In the quarter the company posted earnings of 99 cents a share and revenue of $915.8 million. Both earnings and revenue were below Wall Street estimates.

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Separately, TheStreet Ratings team rates TRIUMPH GROUP INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate TRIUMPH GROUP INC (TGI) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.4%. Since the same quarter one year prior, revenues slightly increased by 3.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has slightly increased to $31.74 million or 4.51% when compared to the same quarter last year. Despite an increase in cash flow of 4.51%, TRIUMPH GROUP INC is still growing at a significantly lower rate than the industry average of 70.82%.
  • The debt-to-equity ratio is somewhat low, currently at 0.66, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.76 is somewhat weak and could be cause for future problems.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: TGI Ratings Report

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