Ternium S.A., through its subsidiaries, manufactures and processes various steel products in Mexico, Argentina, Paraguay, Chile, Bolivia, Uruguay, Brazil, the United States, Colombia, Guatemala, Costa Rica, Honduras, El Salvador, and Nicaragua. It operates in two segments, Steel and Mining.
Ternium S.A. (TX) reported its 2nd quarter earnings on June 2019, beating the consensus estimate by $0.15 cents on a revenue of $2.8 billion. As compared to last year total revenue dropped by 10%. A quick peek at the last few earnings report reveal that it has been constantly surprising the market. (3rd quarter - 55.6% surprise; 4th quarter - 13.3% surprise; 1st quarter - 12.1%, 2nd quarter - 19.5%).
On the other hand, TX stock price has been on a decline for the last two quarters. The stock price lost its value more than 50% since Feb 2019 and is now trading less than $17 at the time of writing this article. While economic conditions and new tariffs on Steel and Aluminium are playing a key role in deciding this stocks price, World Steel Association is expecting a turn around in 2019 for this industry.
Where is the stock heading from here? Would the same downward momentum continue?. While the stock is bearish and has demonstrated a strong downward trend, here are some parameters we can use to determine whether its is oversold and undervalued.
The Relative Strength Index (RSI), a momentum oscillator developed by J. Welles Wilder, measures the speed and change of price movements. The RSI has a range between 0 and 100. Traditionally, the stock is considered overbought when RSI is above 70 and oversold when it is below 30. Most recent entry of Ternium S.A. into the oversold territory was on 08/12/2019 and overbought territory was on 02/12/2019.
"Buy/Sell" volume ratio is a proprietary indicator that measures the buy and sell volume of a security. This represents the strength of the move in either direction. This oscillator ranges between 0 and 100, however the characteristics widely differ based on the trading volume and momentum. For Ternium S.A. the oversold and overbought is fixed at 62 and 15.
Another important volatility indicator to consider is the 14 day ATR (Average True Range). Average True Range is not a directional indicator and it represents the energy behind the move. Beta coefficient (β) measures the volatility of a stock with respect to the market. Beta for Ternium S.A. is (3Y Monthly) 0.05.
The current ratio is a liquidity ratio that measures whether or not a firm has enough resources to meet its short-term obligations. It compares a firm's current assets to its current liabilities, and is expressed as follows: Current ratio = Current Assets/Current Liabilities. If the value is less than 1, it means that the current liabilities exceed current assets and vice versa.. As of changehere, Current Ratio of TX is 2.30
For reasons explained below, we believe this stock is undervalued and oversold. There is a high probability for this stock to make an upward move (10%) from its current price in the upcoming weeks.
We are not a registered investment advisor or a financial advisor or a brokerage firm or an investment company. If you should choose to interpret information from this page/Theory of Stocks, LLC, as investment advice, you do so at your own risk. Please read our disclaimer.
Financial information cited in this article are taken from Yahoo Finance (http://www.yahoo.com/finance); EPS data is taken from Zacks Research (http://www.zacks.com); some of the definitions have been taken from Wikipedia (www.wikipedia.com)