Ternium’s valuation and high dividend yield make the company an intriguing long-term game
Ternium SA (NYSE: TX) is Latin America’s leading steel producer and manufacturer of flat and long steel products with operations in Mexico, Brazil, Argentina, Colombia, the southern USA and Central America. Ternium offers a wide range of high quality steel products for customers in the automotive, home appliance, HVAC, construction, capital goods, container, food and energy industries.
The Ternium share has more than doubled year-on-year and has grown by 45% since the beginning of the year. The security also has a forward dividend of $ 2.10 and a dividend yield of 4.90%. This afternoon TX is up 1.9% to $ 43.42, previously hitting a more than ten-year high of $ 43.73.
As for the analyst outlook, those who looked into stocks looked divided on today’s trading. Specifically, three of the five brokerage firms have a mild “hold” recommendation, a “sell” or worse is not in sight.
Ternium has performed excellently on the earnings side, exceeding expectations in all four of its most recent published quarterly earnings reports. For the second quarter of 2020, it beat estimates by a margin of $ 0.22 and reported earnings per share of $ 0.22. In the third quarter of 2020, Ternium’s earnings per share rose to $ 0.74, beating expectations by $ 0.48. In the fourth quarter of 2020, TX saw another surge in earnings, rising to $ 2.11 per share, beating estimates by $ 1.09. For the first quarter of 2021, Ternium reported earnings per share of $ 3.07, beating expectations with a margin of $ 0.62. Analysts expect TX to post earnings per share of $ 3.29 for the second quarter of 2021.
Fundamentally, Ternium stock can be an excellent investment for the next year or two and a great long-term dividend game. TX trades at an extremely low price-to-earnings-ratio of 6.01 and has an even lower forward price-to-earnings-ratio of 4.62, despite the fact that the price has risen massively over the past year. Ternium also has a manageable balance sheet with $ 1.47 billion in cash and $ 1.99 billion in debt.
However, Ternium struggled to maintain consistent sales and net income growth over the long term. For example, in fiscal 2019, TX saw sales drop 11%. Overall, Ternium stock remains one of the top dividend and value stocks out there today in terms of potential returns.