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Trinity Industries: An Extremely Undervalued Stock

Despite delivering strong results quarter after quarter, Trinity stock has considerably underperformed the market in the last two years.

In my opinion, the market is misguiding Trinity's compelling valuation and its growth prospects, and the stock is extremely undervalued.

Trinity reported another strong quarter results and increased its annual guidance again. The company beat EPS expectations in the last quarter by a big margin.

Trinity is generating strong cash flows and returns value to its shareholders by stock buybacks and increasing dividend payments.

Despite delivering strong results quarter after quarter, Trinity Industries (NYSE:TRN) stock has considerably underperformed the market in the last two years. However, in my opinion, the market is misguiding Trinity's compelling valuation and its growth prospects, and the stock is extremely undervalued. Year to date, TRN's stock is down 9.4% while the S&P 500 Index has increased 0.3%, and the NASDAQ Composite Index has gained 6.2%.

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Trinity Industries makes railcars, and energy, industrial and construction products primarily for the North American market.

On October 22, Trinity Industries reported another strong quarter results and increased its annual guidance again. The company beat EPS expectations in the last quarter by a big margin of $0.15 (12.9%). Revenues for the third quarter of 2015 totaled $1.54 billion compared to revenues of $1.56 billion for the same quarter of 2014. Trinity showed significant earnings per share surprise in its last seven quarters, as shown in the table below.

Third Quarter Highlights

  • Third quarter earnings per common diluted share of $1.31 compared to $0.91 for the third quarter of 2014, a 44% increase year-over-year
  • Increased earnings guidance for the Company for full year 2015 to between $4.65 and $4.90 per common diluted share compared to previous guidance of between $4.45 and $4.75 per share
  • A record operating margin for the Rail Group during the third quarter of 20.8% compared to 18.7% last year
  • Record operating profit of $44.8 million for the Energy Equipment Group...

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