STRATTEC Security Corp. - Aggressive Growth

STRATTEC Security Corp. (STRT) just received a very bullish estimate revision heading into an upcoming earnings release.

Shares are trading at a good value, but is this Zacks #1 Rank (Strong Buy) too speculative?

Company Description

STRATTEC designs and makes Access Control Products for the automotive market, including mechanical and electronic locks and keys, steering columns, power sliding doors and several other components.

A Very Bullish Revision

Analysts by nature can be cautious to a fault with their estimates. So, when we see an analysts raise their projection just before the next earnings report, it is a very good sign that a great quarter is coming.

Such is the case for STRATTEC. In the past week the Zacks Consensus Estimate (which consists of 1 reporting analyst) jumped from $1.85 to $2.07, for fiscal 2011. The company is expected to report its Q2 results for fiscal 2011 on Jan 27.

After earning 92 cents a share last year, the estimated annual growth rate is 125%. Next year's estimate also jumped but is coming in at $1.88. But, as long as those estimates keep climbing, I would not be surprised to the 2012 estimate pass the 2011 forecast before long.

Valuations

While the forward P/E just under 15 is not bad, STRATTEC's market cap is only about $100 million. So, the price-to-sales metric is a bit more telling of the value. At just 0.44 times the company is a nice discount relative to its peer group average of 0.63.

Great First Quarter

Given that STRATTEC is reporting soon, you probably guessed that the last report was almost 3 months ago. In fact it was on Oct 21, but it was a good one.

Sales jumped 45% to just under $60 million. Net income spiked 50% to $1.42 million. Earnings broke down to 48 cents per share, blowing the 8-cent expectation out of the water.

The Chart

Shares of STRT have been on a slow decline the past month or so. This is definitely a speculative play at this point, but with shares oversold and estimates rising, it could be a good bet heading into the earnings release.

Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Small Cap Trader service
 
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