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We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Trinity’s annualized revenue growth of 24.8% over the last two years is above its five-year trend, suggesting its demand recently accelerated.

This quarter, Trinity missed Wall Street’s estimates and reported a rather uninspiring 21.1% year-on-year revenue decline, generating $629.4 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 2.1% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and implies its products and services will face some demand challenges.

Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.

Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Trinity has managed its cost base well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 11.8%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Analyzing the trend in its profitability, Trinity’s operating margin rose by 22.3 percentage points over the last five years, showing its efficiency has meaningfully improved.

In Q4, Trinity generated an operating profit margin of 17.8%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Trinity’s EPS grew at a decent 8.7% compounded annual growth rate over the last five years, higher than its flat revenue. This tells us management responded to softer demand by adapting its cost structure.

Diving into Trinity’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Trinity’s operating margin was flat this quarter but expanded by 22.3 percentage points over the last five years. On top of that, its share count shrank by 30.5%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Trinity, its two-year annual EPS growth of 50.7% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.

In Q4, Trinity reported EPS at $0.34, down from $0.75 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 3%. Over the next 12 months, Wall Street expects Trinity’s full-year EPS of $1.64 to shrink by 1.9%.

Key Takeaways from Trinity’s Q4 Results

We were impressed by Trinity’s optimistic full-year EPS guidance, which blew past analysts’ expectations. We were also happy its EBITDA outperformed Wall Street’s estimates. On the other hand, its revenue missed. Overall, this quarter had some key positives. The stock traded up 2.3% to $35 immediately after reporting.

Big picture, is Trinity a buy here and now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.