Balloon Manufacturer CTI Industries Should Rise As Elevated OpEx Deflates
John Leonard, CFA • Tue, Jul. 29
- The stock is down almost 25% YTD due to growing frustration that the steady revenue growth has not translated into a higher bottom line due to elevated OpEx/interest expenses.
- However, these expenses should be viewed as a “necessary evil” that financed the expansion into the faster growing and higher margin vacuum sealing business.
- Management is working to bring OpEx down to 16% of revenue, which along with continued top line growth should drive a significant EBITDA increase using even conservative assumptions.
- Continued decreases in latex and natural gas prices should provide a meaningful (and underappreciated) gross margin tailwind.
- The fragmented marketplace and low international presence provides plenty of white space for CTI with its high market share, patented technology, entry into club stores and new product roll out.