CTS CORPORATION (CTS): what the price assumes

In the published model solve dated 2026-Q2, anchored at $56.57, CTS CORPORATION (CTS) is priced for +16.8% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/CTS

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 9.7% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.5%); the inversion above states its own rate.

Per-Model Detail (n=17)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• Sensors, connectors and actuators sold into four end markets, with Transportation at 43% of revenue and Industrial, Medical and Aerospace & Defense together making up the rest.
• Trailing operating margin of about 15.1% sits near the top of its component-maker cohort, well clear of VSH at 2.4% and DIOD at 3.5%, but 43% of the revenue base is tied to vehicle production and the component tariffs that come with it.
• Second-quarter results are due July 28, 2026, the first report under a chief executive promoted from the operating side in June.

Bull Case

Start with the objection, because it is the reason the shares are priced where they are. Transportation is 43% of revenue. That means vehicle production schedules, a customer set famous for extracting annual price reductions, and a powertrain transition that has repeatedly changed which components a car actually needs. The 10-K does not soften it, warning that competitive dynamics can "result in price reductions, reduced profit margins and loss of market share". Anyone underwriting this company has to be comfortable with that sentence.

Now look at what the other 57% has quietly become. Industrial is 26% of revenue, Medical 16%, and Aerospace & Defense 15%. Those are three end markets with entirely different buying rhythms: factory automation, implantable and diagnostic equipment, and defense programs that run for years. The company describes its products by function rather than by industry, sorting them into devices that "Sense, Connect or Move", and that framing is the point. A pressure sensor qualified for a hospital ventilator and one qualified for a truck are closer in engineering than in end market, which is what lets a components maker of this size carry four unrelated customer bases at once.

The diversification is showing up in reported results rather than in strategy slides. Management reported that sales to diversified end markets increased 18% in the first quarter of 2026. The quarterly filing puts the profitability effect plainly: "our gross margin percentage increased from 37.0% for the first quarter of 2025 to 39.5% for the first quarter of 2026". Mix is moving toward the higher-margin end markets and the gross line is moving with it.

That mix shift is why the trailing operating margin of roughly 15.1% deserves more attention than the revenue base of about $0.55 billion might suggest. Among components makers, margins like that are not the norm. VSH runs an operating margin of 2.4% on $3.19 billion of revenue and DIOD runs 3.5% on $1.56 billion. BELFA, closest in size at $702 million of revenue, earns 15.6%. CTS is in the second group, not the first, and the difference between those two groups is whether you sell interchangeable parts or engineered ones.

The balance sheet gives the strategy room to keep working. In November 2025 the company put in place a new five-year revolving credit agreement with total availability of $300 million, and the 10-K reports about $240.9 million of that still available at year end, subject to covenant restrictions, at a weighted-average rate of 5.48%. Financing outflows during 2025 ran to about $98.4 million, most of it repayment of borrowings. A company paying down borrowings while gross margin expands and the sales mix shifts toward medical and defense is doing the unglamorous version of the right things.

Bear Case

The variables with the most leverage on this thesis are ones the company does not control. Its own filing lists them: the supply and price of key raw materials and electronic components can be affected by "market demand, inflation, alternative sources for suppliers, global geopolitical events", none of which appear on a components maker's dashboard until they show up in cost of sales. Tariff policy on imported components sits directly on that line. The company assembles in North America, Europe and Asia and sells into all three, so a trade regime that taxes crossings is a tax on its manufacturing footprint specifically, not on its end demand.

The defense revenue carries its own version of policy risk, and it is sharper than most investors assume. The 10-K notes that a portion of those customers "operate under contracts with the U.S. Government, which are vulnerable to termination at any time, for convenience or default", with budgetary constraints named as one of the reasons. Aerospace and Defense is 15% of revenue, and the most stable-looking part of that revenue is contractually the least binding.

Competition is the third external variable, and here the filing is unusually candid: "No one competitor competes with us in every product line, but some competitors are larger and more diversified than we are". In a business where customers qualify parts and then hold suppliers to annual price downs, being the smaller party in every negotiation is a structural disadvantage that shows up slowly, one program award at a time.

Against those exposures, what has to go right is not trivial. Enterprise value works out to about 21 times operating profit, and inverted, that requires operating income to compound at roughly 22% a year for five years. The company's recent record is in that neighbourhood, which is the reason the demand reads as reachable rather than fanciful. But fewer than two in five companies that have grown at that pace held it for a full five years, and the underlying business is 43% exposed to an end market whose unit volumes are set by somebody else's factory schedule.

The methods that do not credit future growth are blunt about the gap. The price runs about 2.02 times what the asset-value methods reach, on a book value of $19.22 a share and a return on equity of about 12.4%. It runs about 2.16 times what the earnings-power methods reach, those being the ones that capitalize today's profit and assume no growth at all. Only the peer-multiple comparison defends today's quote. That is a coherent bull position, and it is also a narrow one: it says the shares are correctly priced relative to other component makers, which is a statement about the group as much as about this company.

Valuation

The firmest thing to say about this valuation is the multiple, and the softest thing is the growth number people will want to quote from it. Enterprise value stands at roughly 21 times operating profit, which puts the company in the lower half of the range its peer group trades in. Inverted under a 9.8% cost of capital, that multiple implies operating income compounding around 22% a year for five years. Hold that second figure loosely: each additional percentage point of required return moves the implied growth by about 7.1 points. A company with this little borrowing and this much end-market variety does not have a precisely knowable cost of capital, which means the implied growth rate is a direction, not a measurement.

The disagreement among methods has an unusual shape here, and it is the most informative thing in the file. Peer multiples land slightly above today's quote, with the price at about 0.87 times what those methods reach. The forward-growth methods sit closer, with the price about 1.28 times what they reach. The static lenses are further away: the price runs about 2.02 times the asset-value methods, on book value of $19.22 a share, and about 2.16 times the earnings-power methods. The pattern says something specific. The market is paying a normal price for this kind of company and a demanding one for this company's own current earnings, which is exactly what you would expect for a business the market believes is in the middle of a mix shift.

The cohort is where that belief gets tested. VSH earns a 2.4% operating margin on $3.19 billion of revenue and DIOD earns 3.5% on $1.56 billion; those are the commodity end of the component business. HUBB earns 20.6% on $6.0 billion and BELFA earns 15.6% on $702 million of revenue growing 25.5%. CTS earns about 15.1% on roughly $0.55 billion. On margin it belongs with the engineered-component names rather than the commodity ones, and the peer multiple it trades on reflects that judgment already.

Capital structure keeps the downside contained without adding to the case. The company entered a new five-year revolving credit agreement in November 2025 with total availability of $300 million, and its 10-K reports roughly $240.9 million still available at year end, subject to covenant restrictions. Financing outflows during 2025 of about $98.4 million came from repaying borrowings. The nearest maturity on that facility is five years out, which means the mix shift gets to play out on its own schedule rather than a lender's. What it does not get is unlimited time: the price already assumes the shift keeps compounding for five more years.

Catalysts

A leadership change arrived first. In June the board named chief operating officer Pratik Trivedi as chief executive and president. Promoting the operating executive rather than hiring outside usually signals continuity of strategy, and the strategy in progress is the shift of revenue mix toward medical, industrial and defense. The first quarterly report under the new chief executive is the one due next.

The operating news through the first half was consistent with that shift. First-quarter results on April 29, 2026 carried an 18% increase in sales to diversified end markets, and the filed quarterly report shows the gross margin percentage rising to 39.5% from 37.0% a year earlier. In June the company introduced a crystal resonator with an integrated thermistor, extending its frequency-control range. Individually small; collectively the same direction.

Second-quarter results are scheduled for July 28, 2026. Two things in that release carry more weight than the headline. The first is whether the diversified end markets grew again at a double-digit rate, since one quarter of mix improvement is noise and two is a trend. The second is what happens to gross margin, because the first-quarter improvement came partly from currency, and a mix-driven gain and a currency-driven one look identical until the currency moves back.

Peer Cohorts (Per Segment, With Filing Citations)

CTS Corporation (whole company) (reported)

• VSH (VISHAY INTERTECHNOLOGY INC)
• FY2025 10-K: 23,228 67,085 10,767 21,914 11,688 329,410 Total assets as of December 31, 2023 : $ 702,299 $ 852,703 $ 352,984 $ 946,585 $ 365,111 $ 459,653 $ 560,588 $ 4,239,923 ________________ F-46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) Note 15 - Segment and Geographic Data…
• FY2025 10-K: 534 Total cost of products sold 568,865 473,515 172,208 598,571 264,092 396,914 - 2,474,165 Gross profit 61,598 119,242 44,343 160,772 100,282 108,646 - 594,883 Segment operating expenses $ 92,157 $ 29,548 $ 22,398 $ 37,710 $ 15,438 $ 25,832 $ - $ 223,083 Segment operating income (loss) $ ( 30,559 ) $ 89,694 $ 21,945…
• BELFA (BEL FUSE INC /NJ)
• FY2025 10-K: 15. RETIREMENT FUND AND PROFIT SHARING PLAN The Company maintains the Bel Fuse Inc. Employees' Savings Plan, a defined contribution plan that is intended to meet the applicable requirements for tax-qualification under sections 401 (a) and (k) of the Internal Revenue Code of 1986, as amended (the "Code"). The…
• FY2025 10-K: …stock, no par value, 1,000,000 shares authorized; none issued - - Class A common stock, par value $ .10 per share, 10,000,000 shares authorized; 2,115,263 shares outstanding at each date (net of 1,072,769 restricted treasury shares) 212 212 Class B common stock, par value $ .10 per share, 30,000,000 shares…
• DIOD (DIODES INC /DEL/)
• FY2025 10-K: 46 Total equity 1,938,409 1,868,947 Total liabilities and stockholders' equity $ 2,448,100 $ 2,386,281 The accompanying notes are an integral part of these consolidated financial statements. 48 DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATE D STATEMENTS OF INCOME (In thousands, except per share data) Twelve Months…
• FY2025 10-K: …the three months ended December 31, 2025. Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2025 to October 31, 2025 -…
• APH (AMPHENOL CORP /DE/)
• FY2025 10-K: …of Income (dollars and shares in millions, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 Net sales ​ $ 23,094.7 ​ $ 15,222.7 ​ $ 12,554.7 ​ Cost of sales ​ 14,577.0 ​ 10,083.0 ​ 8,470.6 ​ Gross profit ​ 8,517.7 ​ 5,139.7 ​ 4,084.1 ​…
• FY2025 10-K: …/ Other includes (i) $ 55.0 related to the amortization of acquired backlog resulting from the CIT acquisition, which is included in Acquisition-related expenses in the Consolidated Statements of Income, and (ii) $ 18.2 of amortization of acquisition-related inventory step-up costs associated with the CIT…
• HUBB (HUBBELL INC)
• FY2025 10-K: …upon the transfer of control in accordance with the contractual terms and conditions of the sale. The majority of the Company's revenue associated with products is recognized at a point in time when the product is shipped to the customer, with a relatively small amount of transactions in the Utility Solutions segment…
• FY2025 10-K: …2025, the Company acquired all of the issued and outstanding equity of Alliance USAcqCo 2, Inc., a Delaware Corporation ("Ventev " ) for approximately $ 73 million, net of cash acquired, subject to customary purchase price adjustments. Ventev is a leading manufacturer and provider of a complete ecosystem of solutions…
• VICR (VICOR CORPORATION)
• FY2025 10-K: ' length terms. We believe our owned and leased facilities are adequate for our foreseeable needs. ITEM 3. LEGAL PROCEEDINGS See Note 16 - Commitments and Contingencies, to the Consolidated Financial Statements for a complete description of the Company's legal proceedings. ITEM 4. MINE SAFETY DISCLOSURES Not…
• FY2025 10-K: …standards , to the Consolidated Financial Statements for a description of newly adopted and recently issued but not adopted accounting pronouncements, including the dates of adoption and expected impact on our financial position and results of operations. Other new pronouncements issued but not effective until after…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.