Greenbrier Companies Inc (NYSE:GBX) announced per a 13D that billionaire Carl Icahn sold off over 65% of his stake, dropping his ownership of the rail car company from 9.9% to 3.4%. The selloff comes after Greenbrier rejected Icahn’s latest offer to pay $22 per share for the company, compared to its $15.60 trading range. Shares fell around 15% last week on the news that Greenbrier rejected the offer (check out Carl Icahn's newest stock picks).
Icahn had offered to merge American Railcar – which he owns over 50% of – with Greenbrier. Icahn’s previous 13D filing announced an offer to buy Greenbrier for $20 per share, but the activist investor upped it to $22 after his initial bid was declined. Merger talks have been on-and-off for about five years now, with Icahn dropping his last major effort in 2008. Raymond James recently downgraded Greenbrier following the announcement that Icahn had decided to sell off his stake.
As a whole, the railcar industry should bode well in the interim as a rise in coal consumption provides a supportive tailwind. This should help Greenbrier as well, despite Icahn’s exit. Greenbrier trades as one of the cheapest rail stocks in the industry on a P/E (9x) and P/CF (4x) basis. One other positive is the 'growth at a reasonable price' opportunity the company's stock presents. Greenbrier trades at a PEG of 0.7 given its 12.5% 5-year expected earnings growth rate.
Comparing Greenbrier to Icahn’s American Railcar, Greenbrier is much cheaper. Both companies trade with a market cap between $425-$675 million, but American Railcar sports a 1x sales multiple, while Greenbrier is at a mere 0.3x. Greenbrier has a 3.2 beta but is down over 35% year to date. Assuming Greenbrier trades in line with American Railcar on a P/S basis, the stock could triple in value as long run growth stabilizes.
But what about the company's competitors?