BUSINESS
Tronox Holdings plc operates as a vertically integrated manufacturer of TiO2 pigment in North America, South and Central America, Europe, the Middle East, Africa, and the Asia Pacific. The company operates titanium-bearing mineral sand mines; and engages in beneficiation and smelting operations. It offers TiO2 pigment; ultrafine specialty TiO2; zircon; feedstock; pig iron; titanium tetrachloride; and other products. The company’s products are used for the manufacture of paints, coatings, plastics, and paper, as well as various other applications. Tronox Holdings plc is based in Stamford, Connecticut.
INVESTMENT RATING
Reflecting future returns on capital that are forecasted to be above the cost of capital, TROX is expected to continue to be an important Value Builder.
Tronox Holdings plc has a current Value Trend Rating of C (Neutral).
This rating combines highly consistent signals from two proprietary PTR measures of a stock’s attractiveness. Tronox Holdings plc has a neutral Power Rating of 50 and a neutral Appreciation Score of 56, resulting in the Neutral Value Trend Rating.
Tronox Holdings plc’s stock is selling well below targeted value. The current stock price of $15.00 compares to targeted value 12 months forward of $23.
This neutral appreciation potential results in an appreciation score of 56 (44% of the universe has greater appreciation potential.)
Tronox Holdings plc has a Power Rating of 50. (This neutral Power Rating indicates that TROX’s chances of enjoying favorable investment performance over the near to intermediate term are only average.)
Contributing to this neutral Power Rating: recent price action has been slightly favorable. Offsetting factors are the Industrial Inorganic Chemicals comparison group is in a slightly weakened position currently; and TROX’s earnings estimates have fallen very significantly in recent months.
INVESTMENT PROFILE
TROX’s financial strength is average. Financial strength rating is 44.
Relative to the S&P 500 Composite, Tronox Holdings plc has slightly more Value than Growth characteristics; its appeal is likely to be to investors heavily oriented toward Income; the perception is that TROX is higher risk. High historical growth is a positive for TROX. Relative weaknesses include: low forecasted profitability, low financial strength, high financial leverage, low expected growth, and high earnings variability. TROX’s valuation is low: high dividend yield, moderate P/E ratio, and low price/book ratio. TROX has unusually low market capitalization.
CURRENT SIGNALS
Tronox Holdings plc’s current operations are strong. Return on equity is rising, reflecting: and rising tax keep rate.
Tronox Holdings plc’s current technical position is very strong. The stock price is in a 4.0 month up move. The stock has appreciated 47.2% from its prior low. The stock price is above its 200 day moving average which is in an uptrend.
ALERTS
Tronox Holdings plc (NYSE: TROX) has recently experienced meaningful negative changes in fundamentals: the consensus estimate for December, 2024 decreased significantly, significant quarterly earnings deceleration occurred, and the consensus estimate for December, 2025 decreased significantly.
The stock is currently rated C.
On 3/6/24, Tronox Holdings plc (NYSE: TROX) stock declined slightly by -0.6%, closing at $15.00. This decline was accompanied by normal trading volume. Relative to the market the stock has been strong over the last nine months and has risen 1.4% during the last week.
CASH FLOW
In 2023, Tronox Holdings plc generated a very significant increase in cash of +$109.0 million (+66%). Sources of cash were much larger than uses. Cash generated from 2023 EBITDA totaled +$461.0 million. Non-operating sources contributed +$19.0 million (+4% of EBITDA). Cash taxes consumed -$367.0 million (-80% of EBITDA). Re-investment in the business amounted to -$24.0 million (-5% of EBITDA). On a net basis, debt investors provided +$125.0 million (+27% of EBITDA) while equity investors received -$105.0 million (-23% of EBITDA).
Tronox Holdings plc’s Non-operating Income, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Tronox Holdings Plc Peer Group. In most years, Tronox Holdings plc was in the second quartile and third quartile. Currently, Tronox Holdings plc is at the upper quartile at +4% of EBITDA (+$19.0 million).
Tronox Holdings plc’s Cash Taxes, %EBITDA enjoyed a volatile overall uptrend over the period. This improvement was accompanied by stability for the Tronox Holdings Plc Peer Group. In most years, Tronox Holdings plc was in the top quartile and lower quartile. Currently, Tronox Holdings plc is lower quartile at -80% of EBITDA (-$367.0 million).
Tronox Holdings plc’s Business Re-investment, %EBITDA has enjoyed a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Tronox Holdings Plc Peer Group. In most years, Tronox Holdings plc was in the top quartile and third quartile. Currently, Tronox Holdings plc is upper quartile at -5% of EBITDA (-$24.0 million).
Tronox Holdings plc’s Debt Investors, %EBITDA has experienced a volatile overall downtrend over the period. This downtrend was accompanied by an opposite trend for the Tronox Holdings Plc Peer Group. (Since 2021 Debt Investors, %EBITDA has experienced a very sharp recovery.) In most years, Tronox Holdings plc was in the second quartile and third quartile. Currently, Tronox Holdings plc is upper quartile at +27% of EBITDA (+$125.0 million).
Tronox Holdings plc’s Equity Investors, %EBITDA has enjoyed a volatile overall uptrend over the period. This improvement was accompanied by an opposite trend for the Tronox Holdings Plc Peer Group. (Since 2021 Equity Investors, %EBITDA has experienced a very sharp decline.) In most years, Tronox Holdings plc was in the second quartile and lower quartile. Currently, Tronox Holdings plc is below median at -23% of EBITDA (-$105.0 million).
Tronox Holdings plc’s Change in Cash, %EBITDA has experienced a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Tronox Holdings Plc Peer Group. (Since 2021 Change in Cash, %EBITDA has accelerated very sharply.) In most years, Tronox Holdings plc was in the lower quartile and top quartile. Currently, Tronox Holdings plc is at the upper quartile at +24% of EBITDA (+$109.0 million).
Tronox Holdings plc’s Cash, %Revenue has suffered a volatile overall downtrend over the period. This downtrend was accompanied by a similar trend for the Tronox Holdings Plc Peer Group. In most years, Tronox Holdings plc was in the second quartile and top quartile. Currently, Tronox Holdings plc is below median at +10%.
PROFITABILITY
Tronox Holdings plc’s return on equity has eroded very significantly since 2020. The current level is -16.3% versus the high of 57.1% and the low of -16.3%.
Tronox Holdings plc’s very strong positive trend in pretax operating return significantly offset by a very strong negative trend in non-operating factors is a significant analytical factor.
The productivity of Tronox Holdings plc’s assets rose over the full period 2014-2023: asset turnover has enjoyed a strong overall uptrend.
Reinforcing this trend, pretax margin enjoyed a volatile overall uptrend although it experienced a very sharp decline after the 2021 high.
Non-operating factors (income taxes and financial leverage) had a significant negative influence on return on equity.
Tronox Holdings plc’s return on equity is lower quartile (-16.3%) for the four quarters ended December, 2023.
Operating performance (pretax return on assets) is at the lower quartile (0.8%) reflecting asset turnover that is at the lower quartile (0.46X) and pretax margin at the lower quartile (1.7%).
Tax “keep” rate (income tax management) is lower quartile (-644.%) resulting in after tax return on assets that is substantially below median.
Financial leverage (leverage) is at the upper quartile (3.17X).
GROWTH RATES
There are no significant differences between Tronox Holdings plc’s longer term growth and growth in recent years.
Tronox Holdings plc’s historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has fallen short of equity growth.
Annual revenue growth has been 2.6% per year.
Total asset growth has been -0.9% per year.
Annual E.P.S. growth has been -40.1% per year.
Equity growth has been 4.2% per year.
Tronox Holdings plc’s consensus growth rate forecast (average of Wall Street analysts) is 1.2% — substantially above the average of the historical growth measures.
Relative to the Tronox Holdings Plc Peer Group, Tronox Holdings plc’s historical growth measures are generally top quartile. Revenue growth (2.6%) has been upper quartile. Total asset growth (-0.9%) has been upper quartile. Equity growth (4.2%) has been upper quartile. E.P.S. growth (-40.1%) has been lower quartile.
In contrast, consensus growth forecast (1.2%) is lower quartile.
PRICE HISTORY
Over the full time period, Tronox Holdings plc’s stock price performance has been volatile and significantly below market. Between May, 2013 and March, 2024, Tronox Holdings plc’s stock price fell -35%; relative to the market, this was a -79% loss. Significant price moves during the period: 1) September, 2021 – October, 2022: -51%; 2) March, 2020 – May, 2021: +371%; 3) November, 2019 – March, 2020: -57%; 4) October, 2017 – December, 2018: -71%; 5) June, 2016 – March, 2017: +318%; and 6) January, 2016 – April, 2016: +104%.
TOTAL INVESTMENT RETURNS
Current annual total return performance of -2.0% is substantially below median relative to the S&P 500 Composite.
In addition to being substantially below median relative to S&P 500 Composite, current annual total return performance through February, 2024 of -2.0% is slightly above median relative to Tronox Holdings plc Peer Group.
Current 5-year total return performance of 7.5% is below median relative to the S&P 500 Composite.
Through February, 2024, with below median current 5-year total return of 7.5% relative to S&P 500 Composite, Tronox Holdings plc’s total return performance is at median relative to Tronox Holdings plc Peer Group.
VALUATION BENCHMARKS
Relative to S&P 500 Composite, TROX’s overall valuation is quite low. Ratio of enterprise value/earnings before interest and taxes is above median. Ratio of enterprise value/assets is lower quartile. Ratio of enterprise value/revenue is lower quartile. Price/equity ratio is lower quartile. Price/earnings ratio is unavailable.
Relative to Tronox Holdings plc Peer Group, TROX’s overall valuation is normal. Ratio of enterprise value/assets is slightly above median. Price/equity ratio is at median. Ratio of enterprise value/earnings before interest and taxes is near the lower quartile. Ratio of enterprise value/revenue is below median. Price/earnings ratio is unavailable.
Tronox Holdings plc has a major value gap compared to the median valuation. For TROX to rise to median valuation, its current ratio of enterprise value/revenue would have to rise from the current level of 1.89X to 2.29X. If TROX’s ratio of enterprise value/revenue were to rise to 2.29X, its stock price would be lower by $7 to $22.
For TROX to hit lower quartile valuation relative to the Tronox Holdings plc Peer Group, its current ratio of enterprise value/revenue would have to fall from the current level of 1.89X to 1.30X. If TROX’s ratio of enterprise value/revenue were to fall to 1.30X, its stock price would decline by $-10 from the current level of $15.
VALUE TARGETS
Reflecting future returns on capital that are forecasted to be above the cost of capital, TROX is expected to continue to be an important Value Builder.
Tronox Holdings plc’s current Price Target of $22 represents a +47% change from the current price of $15.00.
This neutral appreciation potential results in an appreciation score of 56 (44% of the universe has greater appreciation potential.)
Reinforcing this neutral Appreciation Score of 56, the neutral Power Rating of 50 contributes to an Value Trend Rating of C.
Tronox Holdings plc’s current Price Target is $22 (-23% from the 2023 Target of $29 but +47% from the 03/06/24 price of $15.00). This fall in the Target is the result of a -9% decrease in the equity base and a -16% decrease in the price/equity multiple. The forecasted increase in cost of equity has a very large negative impact on the price/equity multiple and the forecasted decline in growth has a very large negative impact as well. Partially offsetting these Drivers, the forecasted increase in return on equity has a very large positive impact.
PTR’s return on equity forecast is 13.1% — above our recent forecasts. Forecasted return on equity enjoyed a dramatic, erratic increase between 2015 and 2023. The current forecast is well above the 2017 low of 4%.
PTR’s growth forecast is 0.0% — significantly below our recent forecasts. Forecasted growth enjoyed a dramatic, erratic increase between 2015 and 2023. The current forecast is significantly below the 2022 peak of 17%.
PTR’s cost of equity forecast is 7.2% — slightly above recent levels. Forecasted cost of equity exhibited a modest, erratic increase between 2015 and 2023. The current forecast is above the 2017 low of 3.3%.
At Tronox Holdings plc’s current price of $15.00, investors are placing a negative value of $-2 on its future investments. This view is not supported by the company’s most recent performance that reflected a growth rate of 13.0% per year, and a return on equity of 6.9% versus a cost of equity of 5.0%.
PTR’s 2025 Price Target of $22 is based on these forecasts and reflects an estimated value of existing assets of $30 and a value of future investments of $-8.
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