TITN - Titan Machinery: Margin Pressure And Inventory Bloat Make The Stock A Cautious Buy

2024-06-02 07:02:35 ET

Summary

• Titan Machinery continues to grow revenues through acquisitions, but underlying performance has been weak, with a flat performance guided for FY2025.
• The FY2025 guidance expects continued significant margin pressure closer to the thin pre-pandemic level, making the investment case more volatile than I previously anticipated.
• The company's inventory is currently bloated, pressuring earnings through high short-term borrowings' interest and margin pressure from inventory management. Improvements are expected in the medium term.
• The valuation leaves space for a good return if margins don't collapse too much further, making the stock an incredibly cautious buy.

Titan Machinery ( TITN ) has reported three quarters of financials after my previous article on the machinery retailer. The company has continued posting good growth driven by bolt-on acquisitions, but margins have seen pressure and are guided to show a significant decrease in FY2025....

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