Terex Corporation (TEX), Caterpillar Inc. (CAT), Deere & Company (DE): Is The Game Over For This Stock?

Only, the dramatic drop in Terex’s forward earnings means the market expects earnings to grow at a swift pace in the near future. Analysts actually see Terex grow by a staggering 41.6% this year.

Could the Street probably be expecting too much from Terex Corporation (NYSE:TEX)? If Terex can grow at that rate, it would be phenomenal. But unless it translates all that growth into increased shareholder value, its stock price might have a tough time keeping pace. Terex’s dismally low return on equity of 5% compels me to think so. Free cash flow that’s twice the profits sounds encouraging as well, but again, will Terex be able to sustain it? More important, $210 million of cash flow is a mere 10% of Terex’s current long-term debt and just a fraction of its nearly 4 billion market cap.

Will Terex make it?

While Terex Corporation (NYSE:TEX) seems to be doing a great job at controlling costs (latest announcements include pulling down the shutters on several businesses in Germany), I feel it really needs to boost its top and bottom lines. Terex has lagged most peers in terms of net income growth in the past five years.

The biggest challenge perhaps will be to make sure it can get material stuff out of Demag Cranes that it acquired in 2011. Being Europe based, successfully integrating Demag must probably be an uphill task for Terex right now. It could probably use Demag’s presence in other global markets to its advantage while Europe rises from the ashes. Meanwhile, an uptick in the North American construction markets should work in Terex’s favor.

My verdict: There’s nothing wrong with Terex’s long-term story. Only, I’d probably like to see faster growth to justify its premium valuations. Booking some profits now might pay off, as you may get a chance to dive in again later at a reasonable price. If you want to get your hands on something now, why not consider a Caterpillar Inc. (NYSE:CAT) or a Deere & Company (NYSE:DE) instead? Both look undervalued for their solid growth stories as suggested above. Meanwhile, don’t let Terex Corporation (NYSE:TEX) out of your sight as a dip may present an opportunity.

The article Is The Game Over For This Stock? originally appeared on Fool.com and is written by Neha Chamaria.

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