TX

We rate Ternium S.A. (TX) as a Buy with a composite score of 71.8/100 at a current price of $43.01. The stock scores above average across the majority of our six quantitative factors and ranks #61 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in value (91th percentile) and stability (87th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a Narrow Moat rating (52/100), Low uncertainty, and Standard capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Ternium S.A. holds a mid-tier position (#30 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 71.8/100 places it at rank #61 in our full 7,333-stock universe. At $5.8B in market capitalization, Ternium S.A. is a mid-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.

The outlook is moderately positive, with revenue expanding at 2% and favorable momentum (69th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 16% (-26.2pp vs sector) narrow to operating margins of 5% (+4.2pp vs sector) and net margins of 1.0%, yielding a gross-to-net conversion rate of 6%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $43.01, Ternium S.A. appears undervalued relative to its fundamentals. Our value factor score of 91/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at EV/EBITDA of 1.6x (discounted to peers), P/B of 0.7x, P/S of 0.1x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a Low uncertainty rating to Ternium S.A.. The company exhibits strong financial stability with a beta of 0.68, conservative leverage (20% D/E), and a stability factor in the 87th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: low beta of 0.68 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 87th percentile and quality factor at the 73th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: conservative leverage (20% D/E) limits balance sheet risk; above-average stability (87th percentile) suggests predictable business dynamics; a 10.66% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Ternium S.A.'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 5.8%, and the balance sheet is managed within acceptable parameters (D/E: 20%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; Ternium S.A. falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 10.66% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, Ternium S.A. receives a Buy rating with a composite score of 71.8/100 (rank #61 of 7,333). Our quantitative framework assigns a Narrow Moat (52/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 77/100.

Our analysis supports a constructive view on Ternium S.A.. The combination of identifiable competitive advantages, low uncertainty, and standard capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.