Terex’s 25.7% return over the past six months has outpaced the S&P 500 by 16.4%, and its stock price has climbed to $69.20 per share. This run-up might have investors contemplating their next move.

Is there a buying opportunity in Terex, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Is Terex Not Exciting?

Despite the momentum, we’re swiping left on Terex for now. Here are three reasons why there are better opportunities than TEX, plus one stock we’d rather own.

1. Lackluster Revenue Growth

We at StockStory place the most emphasis on long-term growth, but within industrials, a stretched historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Terex’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 6.7% over the last two years was well below its five-year trend.

2. EPS Took a Dip Over the Last Two Years

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

Sadly for Terex, its EPS declined by 47.3% annually over the last two years while its revenue grew by 6.7%. This tells us the company became less profitable on a per-share basis as it expanded.

3. New Investments Fail to Bear Fruit as ROIC Declines

A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).

Unfortunately, Terex’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Final Judgment

Terex isn’t a terrible business, but it doesn’t pass our bar. With its shares topping the market in recent months, the stock trades at 14.1× forward P/E (or $69.20 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We’re fairly confident there are better investments elsewhere. We’d recommend looking at one of our all-time favorite software stocks.

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