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Bear Of The Day: GrafTech International (EAF)

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GrafTech Interneational (EAF - Free Report) is a Zacks Rank #5 (Strong Sell) and it is the Bear of the Day today.  The company recently posted a solid beat, but estimates came down so let's take a deeper look to see if there is a silver lining to this cloud.

Description

GrafTech International Ltd. manufactures and provides natural and synthetic graphite and carbon based products and services. The Company offers graphite electrodes, petroleum needle coke, crystalline form of carbon and energy solutions for manufacture of steel, aluminum, silicon metal, automotive products and electronics. GrafTech International Ltd. is based in Independence, United States.

Recent Earnings

I see the most recent earnings report coming in ahead of the Zacks Consensus Estimate.  The company reported $0.35 when $0.21 was epexpected.  The 14 cent beat translates into a positive earnings surprise of 66%, which is good to see.

This was the second beat in the last four quarters, which is still not enough to make a stock a Zacks Rank #5 (Strong Sell).

Estimates

The Zacks Rank is really focused on earnings esimate changes.  I see a few incrreases for this quarter and for next and both of those revisions help the full year number.

The problem is that next year is looking at lower estimates.  I see the number for 2021 was $1.97 60 days ago and is now $1.86.

When estimates fall, the Zacks Rank goes down as well.

Valuation

Despite having the lowest Zacks Rank,there are a few things to like about the valuation.  I see a 5x forward earnings multiple which is super cheap, but it probably is that way since the top line contracted by 33%.  There is no price to book multiple on the Zacks site... and the price to sales mulitple is 1.2x.

I see net and operationg margins in the 40% range, which makes me think that I need to look much deeper into this name as a candidate Stocks Under $10 when the Zacks Rank moves up for this stock.

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