Gentherm: Quintessential Growth Stock
07/17/2014 7:00 am EST
For our latest recommendation, we are revisiting a previously profitable trade; the company is a maker of temperature and climate-control systems for cars and trucks, says Nicholas Vardy, editor of Triple Digit Trader.
Gentherm (THRM) is a strong stock in a strong sector, and I expect it to continue its rise in this momentum-driven market.
Recall that it is the explosion in demand for heated and climate-controlled seats that are driving growth for this Northville, Michigan-based company.
Gentherm’s seats are now found in both midlevel and luxury vehicles, ranging from the Hyundai Sonata to the Land Rover Range Rover, the Infiniti JX and the Cadillac CTX.
As part of its commitment to expansion, Gentherm recently acquired Germany's W.E.T. Automotive Systems, as well as Global Thermoelectric, a maker of thermoelectric generator systems.
Fundamentally, Gentherm is a quintessential growth stock. In the Q1, sales of Gentherm's climate-controlled seats jumped 46% to nearly $82 million and accounted for 42% of total revenue of $193.9 million.
Revenue for the company's heated seats climbed 25% to almost $81 million. Earnings grew 28-167% in the latest four quarters. Sales have accelerated for six straight quarters, from 12% in Q3 of 2012 to 31% in Q1 of this year.
Technically, Gentherm just broke out of a trading range going back to late May. The stock is in a strong uptrend based on the trend-identifying ADX indicator. It also just received a buy signal based on the longer-term MACD indicator.
Like the energizer bunny, this market just keeps going and going. That’s an ideal environment for a strong momentum play like Gentherm. Buy THRM at market and place your stop at $37.75.
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