What a time it’s been for TTM Technologies. In the past six months alone, the company’s stock price has increased by a massive 135%, reaching $70.21 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Following the strength, is TTMI a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free for active Edge members.
Why Does TTM Technologies Spark Debate?
As one of the world's largest printed circuit board manufacturers with facilities spanning North America and Asia, TTM Technologies (NASDAQ:TTMI) manufactures printed circuit boards (PCBs) and radio frequency (RF) components for aerospace, defense, automotive, and telecommunications industries.
Two Positive Attributes:
1. Long-Term Revenue Growth Shows Momentum
A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Luckily, TTM Technologies’s sales grew at a decent 5.6% compounded annual growth rate over the last five years. Its growth was slightly above the average business services company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
TTM Technologies’s EPS grew at an astounding 15.4% compounded annual growth rate over the last five years, higher than its 5.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
One Reason to be Careful:
Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Although TTM Technologies has shown solid business quality lately, it historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6%, somewhat low compared to the best business services companies that consistently pump out 25%+.
Final Judgment
TTM Technologies has huge potential even though it has some open questions, and after the recent rally, the stock trades at 24.7× forward P/E (or $70.21 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
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