Terex trades at $51.46 and has moved in lockstep with the market. Its shares have returned 5.4% over the last six months while the S&P 500 has gained 4.3%.

Is now the time to buy Terex, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is Terex Not Exciting?

We're sitting this one out for now. Here are three reasons why there are better opportunities than TEX and a stock we'd rather own.

1. Slow Organic Growth Suggests Waning Demand In Core Business

Investors interested in Construction Machinery companies should track organic revenue in addition to reported revenue. This metric gives visibility into Terex’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.

Over the last two years, Terex’s organic revenue averaged 2.4% year-on-year growth. This performance was underwhelming and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations.

2. EPS Took a Dip Over the Last Two Years

Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.

Sadly for Terex, its EPS declined by 16.4% annually over the last two years while its revenue grew by 4.4%. This tells us the company became less profitable on a per-share basis as it expanded.

3. Free Cash Flow Margin Dropping

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.

As you can see below, Terex’s margin dropped by 6.1 percentage points over the last five years. This along with its unexciting margin put the company in a tough spot, and shareholders are likely hoping it can reverse course. If the trend continues, it could signal it’s becoming a more capital-intensive business. Terex’s free cash flow margin for the trailing 12 months was 4%.

Final Judgment

Terex isn’t a terrible business, but it doesn’t pass our bar. That said, the stock currently trades at 10.6× forward P/E (or $51.46 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. Let us point you toward an all-weather company that owns household favorite Taco Bell.

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