CMI - Garret Motion: Looks Attractive At Current Levels But Proceed With Caution.
Investment Thesis
Garret Motion (GTX) gained a lot of attention since the spin-off from Honeywell (HON). Stock is down 70+% since its IPO in 2018. Investors don't seem to like the challenges Garret is currently facing with the liability payments to Honeywell, spin-off related tax obligations, high leverage, change in revenue mix and margin pressures (diesel to gasoline turbochargers). However, Garret's revenue consistently outperformed the overall auto sector, and the turbocharger market's long-term outlook remains solid. Comps (below) show the company is trading at a premium based on 2021 EV/EBITDA basis