Time to Buy?Can you elucidate how you are valuing LMN? Can you compare it on value/growth metrics with CTS? At what price would you be comfortable to buy LMN and add to CTS?
We value LMN on a price/sales and price/earnings basis, with a nod to its shareholder roots (CSU), recent growth (99%) and MO (acquisitions but likely to never issue any new shares). It is not cheap at 49X earnings and 15X sales (approx). But so far, so good, it has done exactly as expected. 30%+ earnings growth is expected next year.
CTS is much much smaller, and has a leveraged balance sheet. Earnings have been more volatile and the stock is down this year versus LMN's big gains. Thus, it is much cheaper: barely 10X earnings and less than 0.5X Price/Sales. EPS growth is expected to be 15% to 20% next year. We think CTS has good recovery potential, especially if small caps finally show some momentum as interest rates pivot. As buyers, we would be comfortable with CTS at $4 and LMN at $23. But, if we have a Santa Claus rally or a January small cap bounce, these levels might not be hit. (5iResearch)