Chart Industries (NYSE:GTLS) offers a good case in point of how difficult it can be to stick with transformative growth stories. If you’re lucky, you get a chance to buy in when the growth opportunities aren’t visible (or are widely dismissed), but then when the story starts to work, you have to reconcile increasingly demanding valuations with the underlying growth opportunity.
To be fair, Chart shares aren’t that much more expensive than when I last wrote on the company, with the shares up about 15% against a 9% upward move in the wider industrial sector and a roughly 12% positive move in the S&P 500. Still, from my September 2020 article or October 2019 pieces, the shares have enjoyed quite a run as the market has started pricing in the company’s attractive growth opportunities in cleaner energy and various industrial end-markets.
As I said, valuation is challenging. On my base assumptions the shares look priced to deliver long-term returns around the mid-to-high single-digits, but that’s modeling in less than 10% of the total addressable market that management is projecting for 2030 just for the Specialty Products business (excluding energy and most industrial gasses). If hydrogen and carbon capture really take off, and Chart plays a central role, there’s absolutely meaningful upside to the revenue and cash flows currently in my model.
Read the full article at Seeking Alpha:
Chart Industries - A Solid Core Business With Potentially Transformative Growth Opportunities
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