Tennant (TNC): Buy, Sell, or Hold Post Q3 Earnings?

Tennant has been treading water for the past six months, recording a small loss of 2.9% while holding steady at $73.93. The stock also fell short of the S&P 500’s 16.9% gain during that period.

Is now the time to buy Tennant, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free for active Edge members.

Why Do We Think Tennant Will Underperform?

We're swiping left on Tennant for now. Here are three reasons we avoid TNC and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Tennant grew its sales at a sluggish 3.9% compounded annual growth rate. This fell short of our benchmark for the industrials sector.

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Tennant’s revenue to rise by 2.9%. While this projection suggests its newer products and services will fuel better top-line performance, it is still below the sector average.

3. EPS Took a Dip Over the Last Two Years

Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.

Sadly for Tennant, its EPS declined by 4.3% annually over the last two years while its revenue was flat. This tells us the company struggled to adjust to choppy demand.

Final Judgment

Tennant doesn’t pass our quality test. With its shares underperforming the market lately, the stock trades at 11.4× forward P/E (or $73.93 per share). While this valuation is reasonable, we don’t see a big opportunity at the moment. There are better stocks to buy right now. We’d suggest looking at a top digital advertising platform riding the creator economy.

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