2 Reasons to Like TGLS and 1 to Stay Skeptical

Tecnoglass currently trades at $84.90 and has been a dream stock for shareholders. It’s returned 2,188% since May 2020, blowing past the S&P 500’s 97.3% gain. The company has also beaten the index over the past six months as its stock price is up 7% thanks to its solid quarterly results.

Is now still a good time to buy TGLS? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.

Why Does TGLS Stock Spark Debate?

The first-ever Colombian company to trade on the NASDAQ, Tecnoglass (NYSE:TGLS) is a manufacturer of architectural glass, windows, and aluminum products.

Two Things to Like:

1. Skyrocketing Revenue Shows Strong Momentum

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, Tecnoglass’s 17.5% annualized revenue growth over the last five years was incredible. Its growth surpassed the average industrials company and shows its offerings resonate with customers.

2. Outstanding Long-Term EPS Growth

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Tecnoglass’s EPS grew at an astounding 43.6% compounded annual growth rate over the last five years, higher than its 17.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

One Reason to be Careful:

Free Cash Flow Margin Dropping

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

As you can see below, Tecnoglass’s margin dropped by 11.5 percentage points over the last five years. It may have ticked higher more recently, but shareholders are likely hoping for its margin to at least revert to its historical level. If the longer-term trend returns, it could signal increasing investment needs and capital intensity. Tecnoglass’s free cash flow margin for the trailing 12 months was 9.1%.

Final Judgment

Tecnoglass has huge potential even though it has some open questions, and with its shares beating the market recently, the stock trades at 20.4× forward P/E (or $84.90 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.

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