Foolish Forecast: Time to Move Into TTM?

Quick-turn circuit board manufacturer and Motley Fool Stock Advisor recommendation TTM Technologies (Nasdaq: TTMI  ) is set to release third-quarter earnings Wednesday night. Have a look back at the last report, and then come back here to dig deeper.

What Fools say:
Here's how TTM's CAPS scoring rates against some of its peers and competitors:

Market Cap
(millions)

Trailing
P/E Ratio

CAPS Rating

TTM Technologies

$555.3

18.7

****

Merix (NASDAQ:MERX)

$141.3

NM

**

DDI (NASDAQ:DDIC)

$145.6

NM

-

Sanmina-SCI (NASDAQ:SANM)

$1,180.0

NM

*

Jabil Circuit (NYSE:JBL)

$4,310.0

59.6

**

Data taken from Motley Fool CAPS on 10/30/2007.

There are other high scorers up and down the printed circuit board supply chain, such as assembly expert Flextronics International (Nasdaq: FLEX  ) and Plexus, but TTM is the only company in its direct peer group that gets any respect from the CAPS community.

The latest word on this stock comes from a bullish player, who says that "it's just a matter of time until they reach their potential through the assimilation of the [Printed Board Group] from Tyco (NYSE: TYC  ) and perhaps one last key acquisition in the Far East."

What management says:
In the last quarterly report, CEO Kent Alder mentioned that the integration of that acquisition continues to exceed expectations. As for the near-term outlook, management expects $160 million to $168 million in sales, and $0.14 to $0.20 of earnings per diluted share. Strong order volumes from military and networking customers are balanced by a slow high-end computing market alongside "competitive pressures and pockets of weakness."

What management does:
The Tyco deal is starting to look old, having closed precisely one year ago. Since then, trailing margins have declined across the board. Profits haven't followed from that acquisition, despite more than doubling the old TTM's revenues and creating a larger and more diverse customer base. But management says the integration is on track. So when do we get to see the benefits?

Margins

4/2006

7/2006

10/2006

12/2006

4/2007

7/2007

Gross

23.8%

26.5%

28%

25.2%

22.7%

20.4%

Operating

13.7%

16.6%

18.9%

15%

12.7%

10.3%

Net

13.9%

15.5%

17%

9.5%

7.3%

5.4%

FCF/Revenue

10.6%

12.4%

12%

5.1%

7.8%

6.7%

Y-O-Y Growth

4/2006

7/2006

10/2006

12/2006

4/2007

7/2007

Revenue

5%

15.2%

22%

53.7%

86.4%

104.4%

Earnings

34%

87.7%

162.5%

13.6%

(1.4%)

(28.6%)

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
The first-quarter report brought a 29% stock price spike overnight, and then the second quarter gave shareholders about a 20% haircut three months later. Today, things are back to where they were right before that summer swoon.

That played out pretty much the way I thought it might, putting a stop to an overpriced stock and giving investors a chance to take a position for a reasonable price. Now, we're still waiting for the big payoff from the Tyco deal on the bottom line, but there are a few more cash flow dollars flowing through the company after that shot in the arm.

Now that the company has proved its increased operating cash-generating power, TTM should have no trouble living up to these valuation levels. After all, it's hard to find a peer that can rub two pennies of profit together these days. That doesn't mean the stock is cheap, but you may want it on your watch list.


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