The Goodyear Tire & Rubber Company (GT), Cooper Tire & Rubber Company (CTB): Is There More Steam Left in Rubber Companies?

Crystal gazing beyond rubber

Illinois-based Titan International Inc (NYSE:TWI) is a producer of wheels and tires with a strong focus on agricultural, earth moving, and construction industries. The company is not entirely a play on rubber prices as it supplies its specialty wheel products to original equipment manufacturers apart from selling directly to customers. This makes it a natural beneficiary of the surging demand from construction segment in the United States.

The stock currently trades at a price earnings ratio of 16.2 but the same reduces to 8.7 on a forward basis. It has a PEG ratio of 0.94, while its price-to-sales ratio of 0.65 indicates the stock is undervalued and has room for further growth. However, the problem with the company is its high debt structure, which resulted in lower profits in the most recent quarter despite a 25% jump in revenues to $578.4 million from the same period in 2012.

The Foolish bottom line

Overall, Cooper Tire & Rubber Company (NYSE:CTB) and The Goodyear Tire & Rubber Company (NASDAQ:GT) stand to gain directly from softer prices of natural rubber. Although Indonesia, Thailand, and Malaysia – the three countries which control over 70% of the global natural rubber market – have put a plan in place to reduce supplies and strengthen prices; success of this plan is doubtful as similar plans have failed to yield intended results in the past.

Jacob Wolinsky has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Jacob is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Is There More Steam Left in Rubber Companies? originally appeared on Fool.com is written by Jacob Wolinsky.

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