TTM Technologies, Inc. (NASDAQ:TTMI) and Benchmark Electronics, Inc. (NYSE:BHE) are the two most active stocks in the Printed Circuit Boards industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.
One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Analysts expect TTMI to grow earnings at a 19.90% annual rate over the next 5 years. Comparatively, BHE is expected to grow at a 12.52% annual rate. All else equal, TTMI’s higher growth rate would imply a greater potential for capital appreciation.
Profitability and Returns
Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use EBITDA margin and Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return. TTM Technologies, Inc. (TTMI) has an EBITDA margin of 13.83%, compared to an EBITDA margin of 5.52% for Benchmark Electronics, Inc. (BHE). This suggests that TTMI underlying business is more profitable. TTMI’s ROI is 5.10% while BHE has a ROI of 4.50%. The interpretation is that TTMI’s business generates a higher return on investment than BHE’s.
The amount of free cash flow available to investors is ultimately what determines the value of a stock. TTMI’s free cash flow (“FCF”) per share for the trailing twelve months was +0.04. Comparatively, BHE’s free cash flow per share was -0.05. On a percent-of-sales basis, TTMI’s free cash flow was 0.16% while BHE converted -0.11% of its revenues into cash flow. This means that, for a given level of sales, TTMI is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Liquidity and leverage ratios measure a company’s ability to meet short-term obligations and longer-term debts. TTMI has a current ratio of 1.40 compared to 3.60 for BHE. This means that BHE can more easily cover its most immediate liabilities over the next twelve months. TTMI’s debt-to-equity ratio is 1.08 versus a D/E of 0.15 for BHE. TTMI is therefore the more solvent of the two companies, and has lower financial risk.
TTMI trades at a forward P/E of 7.28, a P/B of 1.45, and a P/S of 0.51, compared to a forward P/E of 18.46, a P/B of 1.13, and a P/S of 0.68 for BHE. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.
Analyst Price Targets and Opinions
When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. TTMI is currently priced at a -34.31% to its one-year price target of $19.50. Comparatively, BHE is -13.14% relative to its price target of $36.67. This suggests that TTMI is the better investment over the next year.
The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 1.80 for TTMI and 3.30 for BHE, which implies that analysts are more bullish on the outlook for BHE.
Risk and Volatility
To gauge the market risk of a particular stock, investors use beta. Stocks with a beta above 1 are more volatile than the market as a whole. Conversely, a beta below 1 implies below average systematic risk. TTMI has a beta of 1.57 and BHE’s beta is 0.53. BHE’s shares are therefore the less volatile of the two stocks.
Insider Activity and Investor Sentiment
Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment. TTMI has a short ratio of 7.16 compared to a short interest of 2.28 for BHE. This implies that the market is currently less bearish on the outlook for BHE.
TTM Technologies, Inc. (NASDAQ:TTMI) beats Benchmark Electronics, Inc. (NYSE:BHE) on a total of 9 of the 14 factors compared between the two stocks. TTMI is growing fastly, is more profitable, generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. In terms of valuation, TTMI is the cheaper of the two stocks on an earnings and sales basis, TTMI is more undervalued relative to its price target. Finally, CCC has better sentiment signals based on short interest.