CTS CORPORATION (CTS): what the price requires
At today's price, CTS CORPORATION (CTS) is priced for +21.6% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/CTS
Headline
| Field | Value |
|---|---|
| Ticker | CTS |
| Company | CTS CORPORATION |
| Current price | $58.83/sh |
| Composition | Transportation 43% / Industrial 26% / Medical 16% / Aerospace & Defense 15% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 14.9% |
| Operating margin today | 15.1% |
| Margin compression implied | -0.2pp |
| Implied growth | 21.6% |
| Multiple paid | 21x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 9.8% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.1pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | +0.12σ |
| cohort percentile (of 177 peers) | 36 |
| sustained it ~5 years at this level | 40% |
| implied end-window share | 0% |
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.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.98x | 5 | expensive |
| Earnings | 2.12x | 4 | expensive |
| Relative | 0.89x | 5 | justifies |
| Growth | 0.91x | 3 | justifies |
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 8.6%); the inversion above states its own rate.
Per-Model Detail (n=17)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $73.46 | 0.80x | yes | FCF base $0.1B, growth 8% (input: historical growth), terminal g 4.0%, WACC 8.5%, 6yr projection |
| DCF Exit Multiple | Growth | $64.56 | 0.91x | yes | Exit EV/EBITDA: 12.3x / 14.3x / 16.3x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $61.29 | 0.96x | yes | P/E 22x (static sector reference · 2026-04), scenarios: 18.3x / 22.0x / 25.7x (bear / base = reference held flat / bull), EV/EBITDA 16x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $25.78 | 2.28x | yes | BV/sh $19.22, ROE (TTM) 12.4%, ke 9.3% |
| Two-Stage Excess Return | Asset | $29.64 | 1.98x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $47.82 | 1.23x | yes | Rev $0.6B, growth 8% (input: historical growth; tapered), Terminal P/S: 2.6x / 3.1x / 3.6x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $53.20 | 1.11x | yes | EPS $2.34, growth 23% (input: historical EPS growth), PEG=1.09 (Fair) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $24.74 | 2.38x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.08B × (1−21%) / WACC 8.5% → EPV (no growth) |
| Residual Income | Asset | $30.44 | 1.93x | yes | BV $19.22 + 5yr PV of (ROE (TTM) 12.4% − Kₑ 9.3%) × BV; BV grows 8.1%/yr |
| Graham Number | Asset | $31.81 | 1.85x | yes | √(22.5 × EPS $2.34 × BVPS $19.22) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $66.04 | 0.89x | yes | EBITDA $0.12B × sector EV/EBITDA 16.0x |
| FCF Yield | Earnings | $30.73 | 1.91x | yes | FCF $87.6M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $75.50 | 0.78x | yes | EPS $2.34 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $6.39 | 9.21x | yes | BV $19.22 × (ROIC 2.8% / WACC 8.5%) |
| P/Sales Sector | Relative | $95.64 | 0.62x | yes | Revenue $0.55B × sector P/S 5.0x |
| PEG Fair Value | Relative | $79.80 | 0.74x | yes | EPS $2.34 × (PEG 1.5 × growth 22.7% (input: historical EPS growth)) → PE 34.1x |
| Earnings Yield | Earnings | $25.30 | 2.33x | yes | EPS $2.34 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net cash | $90.9m |
| Net debt / NOPAT (after-tax) | -1.40x (net cash) |
| Net debt / operating income (pre-tax) | -1.11x (net cash) |
| Interest coverage | 20.0x |
| Share count CAGR (buyback) | -2.7% |
| Burning cash | no |
Bullet Takeaways
The one number that flips the verdict: diversified end markets, medical, industrial, and aerospace and defense, now make up more than half of revenue and grew 18% in Q1 2026, while transportation grew just 3%. CTS is no longer the cyclical auto-parts supplier its multiple history implies.
The balance sheet is a fortress. CTS carries no gross debt and about $91 million of net cash, with interest covered roughly 23 times, which gives it room to keep acquiring without strain.
At $66.95 the price pays about 24x operating income and embeds a margin lift from today's 15.9% toward roughly 17%, sustained for about five years.
Bull Case
The single most decisive metric for CTS is the revenue mix, because it changes what kind of company this is. For years CTS was valued as a cyclical automotive-components supplier, exposed to the boom-bust swings of vehicle production. That is no longer accurate. Diversified end markets, medical, industrial, and aerospace and defense, now represent more than half of revenue, and in Q1 2026 they grew 18% while transportation grew just 3%. The company sells its sensing and connectivity products principally into aerospace and defense, industrial, medical, and transportation markets (FY2025 10-K, accession 0001193125-26-067039), and the deliberate shift in that order, away from cars and toward higher-margin, more predictable end markets, is the heart of its Evolution 2030 strategy. If the mix change holds, the historical auto-cyclical discount should compress, and that single shift is what would re-rate the stock.
The financial profile already reflects the upgrade. Q1 2026 revenue rose 11% to $139.2 million, diluted EPS climbed to $0.59 from $0.44, adjusted gross margin reached 39.5%, and adjusted EBITDA margin hit 23.0%. Those are software-adjacent margins for a components maker, earned because medical and defense parts carry pricing power that commodity auto sensors do not. Management narrowed 2026 guidance to revenue of $560 to $580 million and adjusted EPS of $2.35 to $2.45, a tightening that signals confidence rather than caution. The stock surged nearly 9% on the print.
The balance sheet turns the diversification story into an engine. CTS carries no gross debt and about $91 million of net cash, with interest covered roughly 23 times, so it can fund acquisitions internally without leverage. It has been doing exactly that, integrating MagDev and TEWA Sensors in 2024 and 2025 and adding SyQwest to expand defense capabilities, while pushing into EV thermal management, 6G, and medical robotics. The bull case is clean: a debt-free specialist steadily rotating its mix toward durable, high-margin markets, compounding through bolt-on deals, with the decisive diversification metric already past the halfway mark. The priced-in margin lift toward 17% is modest against what the new mix can support.
Bear Case
The qualitative problem comes first: CTS is being priced as if the diversification is already complete and de-risked, when it is a transition still in progress with a foot in cyclical markets. Transportation, still 43% of the business, remains the largest single end market, and the filing is explicit that downturns in the operations of customers in its industries could materially adversely affect results (FY2025 10-K, accession 0001193125-26-067039). Management's own 2026 guidance assumes softness in commercial-vehicle-related sales. So the company is leaning on medical and industrial growth to offset a transportation segment that is flat to soft, and if the diversified markets cool at the same time auto weakens, the balanced-mix story that justifies the premium frays. The re-rating thesis depends on a clean handoff that has not finished.
Only then do the numbers confirm the disconnect. At $66.95 (June 27, 2026) the stock trades at about 24x operating income, and the valuation methods split: the relative-multiple read roughly justifies the price, but the asset-based and earnings-power methods say it is expensive. The inversion requires the operating margin to rise from 15.9% today toward about 17.3% and hold for more than five years. That is a demanding ask for a components manufacturer that still depends on a cyclical core, and at least one analyst read flags the current price as sitting above the consensus target rather than below it.
The acquisition strategy that powers the bull case is also a risk. Rolling up MagDev, TEWA, and SyQwest while entering EV thermal, 6G, and medical robotics is a lot of integration at once, and a debt-free balance sheet can deteriorate quickly if a deal underperforms or CTS overpays to keep the growth rate up. The business also concentrates credit risk in major customers and depends on key supplier facilities, where a single operational disruption could be material (FY2025 10-K, accession 0001193125-26-067039). The bear case is not that CTS is a bad company; it is that the market has already paid for a completed transformation, leaving little room for the cyclical core to disappoint or the acquisition machine to stumble.
Valuation
Invert the price first. At $66.95 the market pays about 24x company-wide operating income, and the solve runs in duration mode: the price requires the operating margin to rise from today's 15.9% toward roughly 17.3% and hold for about 5.4 years, computed at a 9.95% cost of capital with 4% terminal growth. That assumption reads as elevated, above what the current fundamentals comfortably support, because it asks for both margin expansion and durable persistence. The read is duration-sensitive, with each one-point move in the cost of capital shifting the implied horizon by about 1.7 years.
The valuation families disagree along a clear line. The relative-multiple methods roughly reach the price, reflecting the premium peers in specialized components and the improving mix. The asset-based and earnings-power methods say the stock is expensive, capitalizing today's book value and current earnings rather than the projected margin lift. The net-cash balance sheet, no gross debt and about $91 million of net cash, removes financial risk from the picture but does not by itself justify the multiple.
The synthesis is that CTS is priced for a successful, durable mix shift toward high-margin medical, industrial, and defense markets. If the diversification holds and margins expand as the inversion assumes, the relative methods near the price and the analyst targets in the mid-$50s to high-$50s are the relevant anchors. If the cyclical transportation core or the acquisition cadence disappoints, the asset and earnings-power methods near the $36 base are the honest read. This is a quality compounder priced at the optimistic end of its own evidence, where the debt-free balance sheet is a genuine cushion but the valuation cushion is thin.
Catalysts
The defining recent event was Q1 2026 results reported late April 2026: revenue up 11% to $139.2 million, diluted EPS of $0.59 against $0.44 a year earlier, adjusted EPS of $0.62, adjusted gross margin of 39.5%, and adjusted EBITDA margin of 23.0%. The stock surged nearly 9% on the beat. The most important detail was the mix: diversified end markets grew 18% while transportation grew just 3%, confirming the rotation toward medical, industrial, and aerospace and defense. Management narrowed 2026 guidance to revenue of $560 to $580 million and adjusted EPS of $2.35 to $2.45. The continued pace of diversified-market growth versus transportation is the single operating signal that matters most.
M&A is the other live catalyst. CTS has been actively reshaping its portfolio, integrating MagDev and TEWA Sensors across 2024 and 2025, adding SyQwest to expand defense capabilities, and pushing into EV thermal management, 6G, and medical robotics. With no gross debt and about $91 million of net cash, the company has ample capacity for further bolt-on deals, so each new acquisition is a potential growth and re-rating event. On sentiment, analyst views are constructive but the targets are mixed, with several consensus reads clustering in the mid-$50s to high-$50s, a range that in some readings sits below the current price. The next earnings report, any new acquisition, and the trajectory of commercial-vehicle demand are the events most likely to move the thesis.
Sources: CTS Q1 2026 results (Globe and Mail), CTS Q1 2026 beat fuels surge (Investing.com), CTS Q1 2026 outlook (Simply Wall St), CTS forecast (StockAnalysis).
Peer Cohorts (Per Segment, With Filing Citations)
CTS Corporation (whole company) (reported)
- VSH (VISHAY INTERTECHNOLOGY INC)
- (no filing in the citation store)
- BELFA (BEL FUSE INC /NJ)
- (no filing in the citation store)
- DIOD (DIODES INC /DEL/)
- (no filing in the citation store)
- APH (AMPHENOL CORP /DE/)
- (no filing in the citation store)
- HUBB (HUBBELL INC)
- (no filing in the citation store)
- VICR (VICOR CORPORATION)
- (no filing in the citation store)
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.
- 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.