What a brutal six months it’s been for FTAI Infrastructure. The stock has dropped 41.1% and now trades at $3.77, rattling many shareholders. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Is there a buying opportunity in FTAI Infrastructure, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is FTAI Infrastructure Not Exciting?
Even with the cheaper entry price, we’re passing on FTAI Infrastructure for now. Here are three reasons why there are better opportunities than FIP, plus one stock we’d rather own.
1. Operating Losses Sound the Alarm
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Although FTAI Infrastructure was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 2.4% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.
2. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
FTAI Infrastructure’s earnings losses deepened over the last three years as its EPS dropped 33.7% annually. We’ll keep a close eye on the company as diminishing earnings could imply changing secular trends and preferences.
3. Cash Burn Ignites Concerns
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.
FTAI Infrastructure’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 57.7%, meaning it lit $57.74 of cash on fire for every $100 in revenue.
Final Judgment
FTAI Infrastructure isn’t a terrible business, but it doesn’t pass our quality test. After the recent drawdown, the stock trades at 9.1× forward EV-to-EBITDA (or $3.77 per share). This valuation multiple is fair, but we don’t have much faith in the company. We’re pretty confident there are more exciting stocks to buy at the moment. Let us point you toward a fast-growing restaurant franchise with an A+ ranch dressing sauce.
Stocks We Would Buy Instead of FTAI Infrastructure
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