AXTA Stock Study (11-18-25)

Posted by Mark on April 10, 2025 at 07:26 | Last modified: November 17, 2025 23:52

I recently did a stock study on Axalta Coating Systems Ltd. (AXTA, $28.18). The previous study is here.

M* writes:

     > Axalta Coating Systems Ltd is a manufacturer, marketer and
     > distributor of high-performance coatings systems. It operates in
     > two segments. The Performance Coatings segment provides liquid
     > and powder coatings solutions to a fragmented and local customer
     > base. Its end markets include refinish and industrial. The Mobility
     > Coatings segment relates to the provision of coating technologies
     > to original equipment manufacturers of light and commercial
     > vehicles. The company operates in the geographic areas of North
     > America, EMEA countries, Asia-Pacific and Latin America.

Over the past decade, this medium-size company has grown sales and earnings at annualized rates of 2.5% and 24.6%, respectively. Lines are somewhat up, straight, and narrowing except for YOY sales declines in’16, ’19, and ’20 along with EPS declines in ’16, ’17, ’20, and ’22. Visual inspection barely clears the barbed-wire fence. Sales growth is subbornly low while EPS appears somewhat cyclical but certainly growing. Ten- (Five-) year EPS R^2 is 0.63 (0.76), and Value Line (VL) gives an Earnings Predictability score of 45.

Over the past decade, PTPM trails peer and industry averages while increasing from 3.9% (’15) to 9.4% (’24) with a last-5-year mean of 6.5%. ROE also trails peer and industry averages despite increasing from 9.0% (’15) to 20.4% (’24) with a last-5-year mean of 15.8%. Debt-to-Capital is higher than peer and industry averages despite falling from 76.2% (’15) to 64.3% (’24) with a last-5-year mean of 69.8%.

Quick Ratio is 1.4 and Interest Coverage is 4.1 per M* who assigns a “Narrow” [quantitative] Economic Moat and gives a B grade for Financial Health (per BI website). VL gives a B+ grade for Financial Strength.

With regard to sales growth:

• YF projects YOY 2.8% contraction and 2.2% growth for ’25 and ’26, respectively (based on 18 analysts).
• Zacks projects YOY 2.8% contraction and 1.9% growth for ’25 and ’26, respectively (5 analysts).
• VL projects 2.6% annualized growth from ’24-’29.
• CFRA provides ACE contraction of 2.8% YOY and 0.4% per year for ’25 and ’24-’26, respectively (18).
• M* provides a 2-year ACE of 0.5% contraction per year.

My forecast of zero is toward bottom end of the range.

With regard to EPS growth:

• MarketWatch projects 13.1% and 12.1% per year for ’24-’26 and ’24-’27, respectively (based on 19 analysts).
• Nasdaq.com gives ACE 8.4% YOY and 9.0% per year for ’26 and ’25-’27 (6 / 6 / 4 analysts for ’25 / ’26 / ’27).
• Seeking Alpha projects 4-year annualized growth of 9.6%.
• Finviz gives ACE 5-year annualized growth of 8.9% (2).
• LSEG estimates LTG at 10.1%.
• YF projects YOY 6.3% and 10.1% for ’25 and ’26, respectively (19).
• Zacks projects YOY 6.4% and 8.4% for ’25 and ’26, respectively (6), along with 5-year annualized growth of 10.1%.
• VL projects 11.0% annualized growth from ’24-’29.
• CFRA provides ACE 40.4% YOY and 24.3% per year for ’25 and ’24-’26, respectively (19).

My 7.0% per year forecast is below the long-term-estimate range (mean of five: 9.9%). Initial value is ’24 EPS of $1.78/share (up 47% YOY) rather than 2025 Q3 EPS of $2.09 (TTM).

My Forecast High P/E is 23.0. Over the past 10 years, high P/E falls from 93.6 (’15) to 23.4 (’24) with a last-5-year mean of 36.3 and a last-5-year-mean average P/E of 29.1. I am below the range.

My Forecast Low P/E is 16.0. Over the past 10 years, low P/E falls from 61.4 (’15) to 17.1 (’24) with a last-5-year mean of 22.0. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) is $20.00. Default ($28.50) given initial value from above is INVALID on today’s date. My [arbitrary] projection is 29.0% less than the previous closing price and 24.0% less than the 52-week low.

These inputs land AXTA in the BUY zone with a U/D ratio of 3.2. Total Annualized Return (TAR) is 14.7%.

PAR (using Forecast Average—not High—P/E) of 11.0% is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only nine studies done in the past 90 days (four outliers including mine excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 2.6%, 8.0%, 25.0, and 17.2, respectively. Although the sample is too small for anything but anecdotal comparison, I am lower across the board. VL projects a future average annual P/E of 25.0 that is greater than MS (21.1) and greater than mine (19.5).

MS high / low EPS are $3.00 / $2.04 versus my $2.50 / $1.78 (per share). My high EPS is less due to a lower growth rate and initial value. VL’s $3.00 equals MS.

MS LSPF of $23.10 implies a Forecast Low P/E of 11.3: much less than the above-stated 17.2. MS LSPF is 34.2% less than the default $2.04/share * 17.2 = $35.09 (INVALID on today’s date) resulting in more conservative zoning. MS LSPF is still 15.5% greater than mine.

MOS is robust in the current study because my inputs are less than or near respective analyst/historical ranges. Also suggestive of MOS is MS TAR being 6.7%/year greater than mine along with a greater MS LSPF.

With regard to valuation, PEG is 1.1 and 1.8 per Zacks and my projected P/E, respectively: fairly valued on average (although M* is only 0.4). Relative Value [(current P/E) / 5-year-mean average P/E] is extremely low at 0.47 and the “quick and dirty DCF” indicates 47% [no intentional relation to previous] undervalued.

I am concerned that sales may eventually be a drag on EPS growth, but the former is not material to this analysis.

Per U/D, AXTA is a BUY under $29.40/share. BI TAR criterion is met [57.5 / ((14.87 / 100 ) +1 ) ^ 5] = $28.75 with a forecast high price under $58 (no dividend).

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