Q: Do you expect better results going forward with the changes being implemented? What would be a good entry point? Do you foresee any significant headwinds?
5i Research Answer:
CTS is acting better, and analysts are expecting margin expansion in the coming years. It remains very cheap at 7.1X forward earnings, and its free cash flow is quite strong. It is somewhat levered, but it has been working on reducing debt, and it is actively buying back shares.
Potential headwinds include the competitive market it operates in, IT budgets going forward, and its ability to grow through acquisitions.
We would like to see the $4.2 level hold, if it does not, we think it could see the high $3s, but if $4.2 holds, we would be comfortable with buying here. Above $4.5 would indicate positive momentum from its current range.