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TTM Technologies (NASDAQ:TTMI) may not be on the front page of your newspaper but it should be. This firm isn’t a hot name among technology analysts or CNBC yet, but with the way it has been performing it’s only a matter of time. Perhaps you’ve never heard about this firm before because it works in the “boring” but lucrative industry of electronic hardware and printed circuit boards. Who cares though because it’s on your radar now and that’s what matters.

We understand that this industry doesn’t sound like the most exciting aspect of technology but this company is going to keep moving forward regardless. At this time we rate TTMI a BUY because the firm has stellar growth numbers, solid financials, and a top client list that include names such as Apple (NASDAQ:AAPL).

Flying on Jet Fuel with Improving Margins

We’re not going to sugar coat the truth here so understand that the firm missed sales projections last quarter and took a short term hammering. Still, this firm’s year over year revenue growth was 148%. That’s still pretty impressive in our view. In addition, when looking over a 10-year period the firm averaged 19.2% in revenue growth. Now that is definitely a solid growth number over the last decade.

Revenue Growth Trends:

Latest Quarter (Year over Year)

148.01%

3-Year Average

20.78%

10-Year Average

19.2%

We like the fact that the firm has improved its operating margin over the last few years and gotten it back above 10%. The EPS trend has moved in tandem with the operating margin and continually improved as the global economy bottomed and turned the corner.

Profit Margin Trends:

Year

2009

2010

TTM

Gross Margin

17.72%

21.57%

22.35%

Profit Margin

3.17%

10.64%

11.66%

EBT Margin

1.39%

9.21%

10.25%

EPS

$.11

$1.01

$1.17

When we look at the technology sector growth is what separates the men from the boys in a manner of speaking. UBS and Needham must also agree because they recently upgraded the firm from neutral to a BUY and STRONG BUY respectively. Come August we expect the firm to report solid numbers and illustrate to investors that the firm is continuing on a path to stellar success.

An A-List Celebrity Party

In any business the customer list always has a strong influence on how a firm ultimately performs. When looking over TTMI’s client portfolio it looks like a “who’s who” of A list clients that includes names such as Apple and Northrop Grumman (NYSE:NOC).

There is little doubt in our mind that the firm is also enjoying the smart phone wave as it provides high quality printed circuits as a supplier for Apple. The range in industries and client make up in our view provides diversification benefits that help reduce its risk profile.

Respectable Fundamentals

TTM Technologies financials are respectable and give us no reason for alarm. The firm’s quick ratio stands at 1.06 and the current ratio of 1.51. When looking over current assets no particular variable was huge such as inventory or accounts receivable. The reason we care about this deals with the fact that certain asset components can sometimes skew the picture of how liquid a firm actually is. The financial leverage of the firm was moderate at 2.33 and the capital structure looked fine with a D/E ratio of .56 based off numbers from last quarter. The cash conversion cycle looks to be improving overall and inventory is being managed well.

Conclusion:

TTM Technologies looks like it has everything in place to go higher from our perspective. As well, this is probably one the least well-covered Apple suppliers and it’s baffling in some ways but then again it’s great for investors who are aware of the relationship. For investors interested in overlooked names within the tech space with think TTMI is a great firm to check out and that’s why we list it a BUY.

Source: Apple Hardware Supplier TTM Tech Ready to Go Higher