Monday, September 28, 2015

Titan Machinery Closed Week @ $11.42, Where is it Headed Next?

My opinion for the stock is that it heads down below the $5 range. 

The underlying business is shrinking dramatically. IN FY2013 they earned $42 million in net income and FY2015 they reported a loss of $31.5 million.

For the 1st 6 most of FY2016 they have loss ($0.29) , over $ 6 million loss.
Their credit lines were reduced by over $100 million and the covenants of their $150 million Indenture with Wells Fargo has had 6 amendment, the last being made earlier this year "After the company" was non compliant with the terms of the note.

The company faces tighter restrictions on the $WFC note and may be in jeopardy of violating the net income covenant for FY2016 Q3 when they report in December.

Aside from the weak fundamentals crippling the stock , the management has some very suspicious dealings.
Management entered into a long term $100 million contract with an outside entity that Management has an equity interest in. 

A year ago the company filed a 10Q and inflated their assets and understated losses and never deemed it necessary to re file that 10Q.
(by over 50%)

In May of this year the company filed a DEF 14A disclosing that the Founder would continue as President and asked the shareholders for the president to vote their shares via a proxy. After the DEF 14A filing, 4 days later, the founder resigned as President. No DEF 14A was re filed.

Of the 8 directors of the company in May 2015 , 3 have now resigned, including the CEO of CONN who resigned a week ago , effective immediately.

There has been suspicious trading in the stock, specifically around the resignation of the company's original auditor resigned over the 4th of July weekend in 2013.

The company has also had some personal selling (insider selling) after some hyped guidance that pumped up the stock price significantly up at the $29 level. (including an appearance on Jim Cramer's Mad Money.)

In June 2014, after the company reported FY2015Q2 , gave guidance that for the FY2015 ending in less than 6 months, that they would earn close to $1.00 a share in net income for the year ending Jan. 31,2015. Well less than 6 months later they reported a LOSS ($1.51) eps. A huge miss, 

The company is not a growth company any longer and is not profitable any more and should not be trading with a fwd PE 160.

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