At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." While the pinstripe-and-wingtip crowd is entitled to its opinions, we've got some pretty sharp stock pickers down here on Main Street, too. (And we're not always impressed with how Wall Street does its job.)

Given that, perhaps we shouldn't be giving virtual ink to "news" of analyst upgrades and downgrades. And we wouldn't -- if that were all we were doing. Fortunately, in "This Just In," we don't simply tell you what the analysts said. We also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

Time to move on TTM Tech?
Defying the downturn, shares of TTM Technologies (NYSE: TTMI) jumped yesterday on the back of an upgrade from Needham. Actually, a double-down upgrade. Already on record as saying investors could buy the stock, yesterday Needham pounded the table and insisted the stock is a strong buy. But why?

Quips Needham: "At the risk of angering the gods of summer vacation, weak derivative calls, and plummeting skies, we are upgrading TTMI to Strong Buy ... TTMI remains one of the best run companies in our universe, and boasts an impressive customer list with some of the leading players in tech." (Among them, such marquee tech names as Apple (Nasdaq: AAPL), Cisco (Nasdaq: CSCO), and ... the "Government of the United States." And if business hasn't been exactly great at those last two names, at least Apple still seems shiny.)

Needham sees TTM earning $0.40 per share in Q2 on $355 million in revenue -- right in the middle of management's guidance range, so the analyst isn't being too aggressive here. Based on these numbers, and a projected $1.75 in profits for the full year, Needham argues the stock's worth $21 if it's worth a dollar.

All in favor, say "aye"
Investors seem to be buying the argument, as TTM enters its second day of strong price appreciation. But are they right to be buying on Needham's say-so? After all, while better than many analysts we track, Needham's got a pretty checkered past in the electronics components space. Out of 10 active recommendations in this industry, Needham is currently above water on just two. That's bad news, right?

Well, yes. But not quite as bad as it sounds. While far from perfect, Needham has picked at least a few winners in this industry in the past -- some middling, others great:


Needham Rating

CAPS Rating
(out of 5)

Needham's Picks Lagging S&P by

Jabil Circuit Outperform **** <1 point
National Instruments Outperform **** 79 points
IPG Photonics   Outperform **** 130 points (!)

Even more telling, Needham has twice before recommended TTM Tech itself -- and come away a winner each time. In total, its two past recommendations of the company have netted investors 63 points worth of market outperformance.

Call me crazy, call me a Fool, but I think the third time's going to be charmed for Needham as well. Why?

Valuation matters
According to Needham, TTM is selling at a big discount today, "and any opportunity to pick up such a high-quality company at such a discount should be seized upon." I agree.

Last month, as you may recall, I predicted that once TTM released its cash flow statement for the fiscal first quarter, we would see that the company generated "about $60 million in annual FCF" for the past 12 months. Well, the statement is out, and guess what? TTM actually generated $64.6 million.

Now, that's not as good as the $94 million in GAAP profit TTM claims on its income statement. I admit that. Still, $64 million is enough to value this company at less than 18 times free cash flow, and according to most analysts, TTM's set to grow 20% per year over the next five years. That's faster than rival Sanmina-SCI (Nasdaq: SANM). It's about twice as fast as customers Cisco, Jabil, and Ericsson (Nasdaq: ERIC) are expected to grow, and durn near as fast as Apple.

Foolish takeaway
And it's plenty fast enough to justify an 18 times FCF valuation on the stock. Long story short, Needham has been right about TTM Tech twice already. It's right again today.