Morgan Stanley analysts are well-versed in Trinseo stock (NYSE:TSE), cutting their price objective from $33 to $20 with the classification “equal weight.” That new price goal is slightly higher than where it is already trading.

Market Analysis of Trinseo Stock

Analyst ratings often cause a stock’s price to shift. In the instance of Trinseo stock (NYSE:TSE) , the stock actually rose on Thursday, closing at $19.23, a gain of $0.61 or 3.28%. Trinseo’s price behavior followed that of the larger market, with a large drop on news of higher-than-expected inflation early in the day. Stocks rose throughout the day, resulting in large daily gains.

Trinseo has a market capitalization of around $670 million. It is still in its infancy as a public company, having gone public in 2014 after separating four business divisions from Dow Chemical (NYSE: DOW). A relatively young firm like Trinseo is often in a favorable position to make significant price gains.

The S&P 600 small-cap index, as tracked by ETFs such as the SPDR Portfolio S&P 600 Small Cap ETF, is the most relevant benchmark for Trinseo (NYSEARCA: SPSM). Year to date, the index is down 23.65%, while Trinseo is down 62.07%.
What are Trinseo’s probable pitfalls?

Investors must examine the prospects for a company’s clients if it is a supplier to another industry. Trinseo’s enterprise clients, for example, come from consumer electronics, medical, automotive, and food packaging areas.

You can immediately identify consumers who may face inflationary and recessionary conditions. The car sector, for example, has been suffering owing to supply-chain challenges, some of which are the result of troubles in the chip business.

A study of Trinseo’s income in previous quarters reveals an unfavorable picture: While sales continue to expand, growth rates have slowed over the last four quarters, falling from 138% to 12% most recently. As a result, profit growth slowed and subsequently started to plummet.

Trinseo’s three-year profits growth rate is robust, at 70%, showing growth in 2020, followed by a significant gain last year. Its three-year sales growth rate is a little slower, at 11%.
Make no mistake: the corporation is projected to stay successful, but profits have been steadily declining. For example, Trinseo’s profits in 2021 were $9.64 per share. Analysts estimate Trinseo will earn $3.02 per share this year, a 69% decrease.

Overall, the chemicals and plastics sub-industry is failing; thus, Trinseo isn’t an exception in a generally robust sector.
The lesson from Trinseo is that just because a company is moving due to an upgrade or downgrade doesn’t indicate it’s at an appealing purchase opportunity. Given the industry’s general bad performance and the fact that Trinseo is behind so many of its rivals, it may be prudent to continue watching the performance. As inflation and recessionary fears batter these equities, there are certainly better options for your watch list right now.