TTM Technologies (TTMI): A Hidden Bargain or a Risky Bet? An In-depth Valuation Analysis
TTM Technologies Inc (NASDAQ:TTMI) has seen a daily loss of -4.39% and a 3-month loss of -6.72%, with an Earnings Per Share (EPS) of 0.49. In this context, we aim to answer the question: Is TTM Technologies modestly undervalued? This article provides an in-depth valuation analysis of TTM Technologies, encouraging readers to delve into the financial intricacies of the company.
Company Overview
TTM Technologies Inc, a leading manufacturer of printed circuit boards, is based in the United States, drawing roughly half of its revenue domestically. The company operates in two segments: printed circuit boards and RF&S Components. TTM Technologies' products are widely used in manufacturing, networking, telecommunications, computing, aerospace, and medical fields. With a current stock price of $12.96 and a GF Value of $15.5, TTM Technologies appears to be modestly undervalued, suggesting a potential opportunity for value investors.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an ideal fair trading value for the stock. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $12.96 per share, TTM Technologies, with a market cap of $1.30 billion, appears to be modestly undervalued.
Evaluating Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before buying shares. TTM Technologies has a cash-to-debt ratio of 0.45, ranking worse than 75.12% of 2351 companies in the Hardware industry. Based on this, GuruFocus ranks TTM Technologies's financial strength as 6 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Companies with consistent profitability over the long term offer less risk for investors. TTM Technologies has been profitable 9 out of the past 10 years. Over the past twelve months, the company had a revenue of $2.40 billion and Earnings Per Share (EPS) of $0.49. Its operating margin is 5.57%, which ranks better than 58.86% of 2421 companies in the Hardware industry. Overall, the profitability of TTM Technologies is ranked 7 out of 10, indicating fair profitability.
Growth is a crucial factor in the valuation of a company. The 3-year average annual revenue growth rate of TTM Technologies is 6.2%, which ranks better than 55.9% of 2313 companies in the Hardware industry. However, the 3-year average EBITDA growth rate is 3.3%, which ranks worse than 63.96% of 1937 companies in the Hardware industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, TTM Technologies's ROIC was 2.14, while its WACC came in at 7.42.
Conclusion
In summary, the stock of TTM Technologies (NASDAQ:TTMI) appears to be modestly undervalued. The company's financial condition is fair and its profitability is fair. Its growth ranks worse than 63.96% of 1937 companies in the Hardware industry. To learn more about TTM Technologies stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
