CTS Corporation (CTS): Shares define bullish 'flag' consolidation

Posted Feb 15th 2008 12:35PM by Larry Schutts
Filed under: Earnings Reports, Hewlett-Packard (HPQ), Motorola (MOT), Technical Analysis, Stocks to Buy

CTS Corporation (NYSE: CTS) designs and manufactures electronic components and sensors for original equipment manufacturers in the automotive, computer, communications, medical, defense, aerospace and industrial markets. Products include automotive sensors, oscillators, RF modules, resistors, switches, piezoelectric ceramic components, backplanes and interconnect systems. Hewlett-Packard (NYSE: HPQ) and Motorola (NYSE: MOT) are major customers.

The firm surprised investors late last month, when it announced Q4 EPS of 25 cents and revenues of $178.3 million. Analysts had been expecting 20 cents and $176.6 million. Management also guided FY08 EPS to 78-83 cents (81 cent consensus) and FY08 revenues to about $720.2-$740.8 million ($721.99M consensus). In discussing the positive quarter and solid outlook, the CEO pointed to the recent acquisition of new piezoceramic and electronic technologies.

The stock price popped through 30-day and 50-day moving average resistance on the news and then began forming a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend CTS with one "strong buy" and two "holds." Analysts see an 18% growth rate through the next year. The CTS P/E ratio (16.15), Price to Sales ratio (0.55), Price to Book ratio (1.16) and EPS Growth rate (25%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 92% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $8.99 and $14.24. A stop-loss of $8.80 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.

Tags: CTS, CTS Corporation, CtsCorporation, flag, fundamental analysis, FundamentalAnalysis, momentum, technical analysis, TechnicalAnalysis