Q: Is CTS still a favourite 5i small cap pick?
5i Research Answer:
We continue to like CTS, and although its recent momentum has not been favourable, we believe its long-term value is still in play. It pays a small yield of 1.4%, analysts expect decent forward sales and earnings growth, albeit slightly lumpy, but its valuation reflects this, at 7X forward earnings. Its valuation is cheap, its debt levels are fine, and its free cash flow is impressive. While recent momentum has not been great, we continue to believe its valuation will re-rate as its fundamentals continue to improve.