FBR Capital Thinks Gentherm’s Stock is Going to Recover

By Ryan Adsit

In a report released today, Christopher Van Horn from FBR Capital reiterated a Buy rating on Gentherm (NASDAQ: THRM), with a price target of $42. The company’s shares opened today at $27.95, close to its 52-week low of $27.40.

Van Horn noted:

“Gentherm shares present a highly attractive opportunity at current levels. Shares trade at a substantial discount to the automotive technology space (as well as to the stock’s historical levels), but we expect growth to well exceed underlying production during 2017 and for margins to remain stable at quite healthy levels. Much debate around this stock has focused on two factors: slower growth in its CCS business and the Lear-Tempronics partnership. These have put pressure on the stock, which is down 40% year to date. Yet coming off a quite decent 3Q16 report, and with numerous opportunities for above-industry growth through coming years, we believe that the 6.9x 2017 EBITDA multiple that shares currently trade at is unjustified. In particular, we think the company’s ramp in R&D spending (+23% year to date, including acquired spending of CSZ) is fueling development of potentially high-growth technologies, like hybrid battery cooling. Those opportunities are not priced in, but we think that this could change in the coming 12 months.”

According to TipRanks.com, Horn is a 3-star analyst with an average return of 1.8% and a 40.0% success rate. Horn covers the Consumer Goods sector, focusing on stocks such as Standard Motor Products, Federal-Mogul Corp., and Tower International.

Gentherm has an analyst consensus of Moderate Buy.

Based on Gentherm’s latest earnings report from June 30, the company posted quarterly revenue of $232.7M and quarterly net profit of $18.45M. In comparison, last year the company earned revenue of $223.8M and had a net profit of $27.67M.

Based on the recent corporate insider activity of 38 insiders, corporate insider sentiment is positive on the stock. This means that over the past quarter there has been an increase of insiders buying their shares of THRM in relation to earlier this year. Most recently, in June 2016, Darren Schumacher, a the VP Product Development of THRM sold 16,011 shares for a total of $604,115.

Gentherm, Inc. designs, develops, manufactures and markets thermal management technologies and automotive cable systems. Its automotive products provide solutions for automotive passenger comfort and convenience, battery thermal management, remote power generation and other consumer and industrial temperature control needs. The company also focuses on developing new design applications from its existing technologies to create new products and market opportunities for thermal comfort solutions. It operates its business through two segments: Automotive and Industrial. The Automotive reporting segment represents the aggregated results from Gentherm’s three geographic operating segments: North America, Europe and Asia. Its focus on automotive seat comfort systems, specialized automotive cable systems and other automotive and non-automotive thermal convenience products. The Industrial reporting segment represents its subsidiary, Gentherm Global Power Technologies, which is developer of thermoelectric generators, and Gentherm’s advanced research and product development division. Gentherm was founded by Lon E. Bell in 1991 and is headquartered in Northville, MI.