John Leonard, CFA
Special situations, micro-cap, contrarian, CFA

Balloon Manufacturer CTI Industries Should Rise As Elevated OpEx Deflates

Company overview

CTI Industries (NASDAQ:CTIB) sells novelty balloons, home vacuum sealing systems/accessories and film products used for packaging.

The string keeping net income close to the ground is about to be cut

The consistent and broad-based growth (across every category except for film products) shown in the chart below has not translated into a higher bottom line due to the persistently high OpEx and interest expenses.

This negative trend continued in 1Q14 as the 30% increase in OpEx more than offset the 12% increase in revenue and resulted in a 39% decrease in operating income. However, on the 1Q14 conference call (no transcript available; free registration) management said that the expense run rate should begin to come down...

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