Tredegar Corporation (TG): A Bull Case Theory

We came across a bullish thesis on Tredegar Corporation (TG) on ValueInvesting subreddit page by Friendly-Excuse400. In this article, we will summarize the bulls’ thesis on TG. Tredegar Corporation share was trading at $8 as of Oct 17th. TG’s trailing P/E was 7.30 according to Yahoo Finance.

A close-up of an advanced machine cutting aluminum extrusions with precision.

Tredegar Corporation (TG) is a small-cap industrial company with a current market capitalization of $275 million, trading at $7.99 per share. Tredegar (TG) received positive news with Brazilian regulators approving the sale of its Terphane business to Oben Group, set to close on November 1. This sale is expected to generate $85 million, which TG plans to use to reduce its debt. Currently, TG has a market cap of $275 million and trades at $7.99 per share. After the sale, the company will operate two profitable divisions: Aluminum extrusion and PE films, both of which are EBITDA positive.

Despite recent challenges, including a $3.10 per share loss in 2023 due to excess inventory across all three businesses, TG’s outlook is improving. After renegotiating bank covenants and addressing credit debt that peaked at 3.9x EBITDA, the company eliminated its dividend, causing its share price to hit a 52-week low of $3.98. However, in 2024, TG’s performance rebounded, posting a profit of $0.26 per share in Q2 with an EBITDA of $26 million. By the end of that quarter, credit debt was reduced to 2.5x EBITDA, and following the Terphane sale, it is expected to drop further to 0.8x by the end of 2024.

While TG remains uncovered by analysts, projections for the remaining divisions suggest sales of $672 million next year, with an EBITDA of $80 million and earnings of $1.22 per share. Anticipating free cash flow of $36 million, TG is likely to reinstate a dividend at a lower rate than before. With manageable debt and a return to profitability, TG is poised for a significant revaluation, potentially reaching a historical share price in the mid-teens, representing a 75-100% upside from current levels.

Tredegar Corporation is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 9 hedge fund portfolios held TG at the end of the second quarter which was 10 in the previous quarter. While we acknowledge the risk and potential of TG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.