Trinity trades at $32.46 per share and has stayed right on track with the overall market, gaining 6.8% over the last six months. At the same time, the S&P 500 has returned 11.7%.
Is there a buying opportunity in Trinity, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Trinity Not Exciting?
We’re sitting this one out for now. Here are three reasons we avoid TRN, plus one stock we’d rather own.
1. Backlog Declines as Orders Drop
Investors interested in Heavy Transportation Equipment companies should track backlog in addition to reported revenue. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into Trinity’s future revenue streams.
Trinity’s backlog came in at $1.6 billion in the latest quarter, and it averaged 24.9% year-on-year declines over the last two years. This performance was underwhelming and shows the company is not winning new orders. It also suggests there may be increasing competition or market saturation. 
2. Projected Revenue Growth Shows Limited Upside
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Trinity’s revenue to stall. Although this projection suggests its newer products and services will fuel better top-line performance, it is still below the sector average.
3. Cash Burn Ignites Concerns
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Trinity’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 16.4%, meaning it lit $16.38 of cash on fire for every $100 in revenue. This is a stark contrast from its operating margin, and its investments in working capital/capital expenditures are the primary culprit.
Final Judgment
Trinity isn’t a terrible business, but it doesn’t pass our bar. That said, the stock currently trades at 18.2× forward P/E (or $32.46 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We’re fairly confident there are better investments elsewhere. We’d suggest looking at an all-weather company that owns household favorite Taco Bell.
Stocks We Would Buy Instead of Trinity
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