CTS Corporation (CTS) & Methode Electronics (NYSE:MEI) Critical Comparison

CTS Corporation (NYSE: CTS) and Methode Electronics (NYSE:MEI) are both small-cap computer and technology companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, risk, profitability, earnings, dividends, analyst recommendations and valuation.

Profitability

This table compares CTS Corporation and Methode Electronics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
CTS Corporation 7.49% 11.54% 7.08%
Methode Electronics 11.38% 18.81% 14.16%

Analyst Ratings

This is a breakdown of current ratings for CTS Corporation and Methode Electronics, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CTS Corporation 0 2 1 0 2.33
Methode Electronics 0 1 3 0 2.75

CTS Corporation currently has a consensus price target of $24.50, suggesting a potential upside of 12.64%. Methode Electronics has a consensus price target of $45.50, suggesting a potential upside of 18.64%. Given Methode Electronics’ stronger consensus rating and higher possible upside, analysts clearly believe Methode Electronics is more favorable than CTS Corporation.

Dividends

CTS Corporation pays an annual dividend of $0.16 per share and has a dividend yield of 0.7%. Methode Electronics pays an annual dividend of $0.36 per share and has a dividend yield of 0.9%. CTS Corporation pays out 17.6% of its earnings in the form of a dividend. Methode Electronics pays out 14.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Methode Electronics has increased its dividend for 3 consecutive years. Methode Electronics is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider & Institutional Ownership

91.9% of CTS Corporation shares are owned by institutional investors. Comparatively, 90.1% of Methode Electronics shares are owned by institutional investors. 1.7% of CTS Corporation shares are owned by company insiders. Comparatively, 4.4% of Methode Electronics shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Risk & Volatility

CTS Corporation has a beta of 1.23, meaning that its share price is 23% more volatile than the S&P 500. Comparatively, Methode Electronics has a beta of 0.76, meaning that its share price is 24% less volatile than the S&P 500.

Valuation & Earnings

This table compares CTS Corporation and Methode Electronics’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
CTS Corporation $407.12 million 1.76 $76.03 million $0.91 23.90
Methode Electronics $816.50 million 1.73 $149.90 million $2.48 15.46

Methode Electronics has higher revenue and earnings than CTS Corporation. Methode Electronics is trading at a lower price-to-earnings ratio than CTS Corporation, indicating that it is currently the more affordable of the two stocks.

Summary

Methode Electronics beats CTS Corporation on 13 of the 17 factors compared between the two stocks.

CTS Corporation Company Profile

CTS Corporation is a manufacturer of sensors, electronic components and actuators. The Company designs, manufactures and sells a line of sensors, electronic components and actuators primarily to original equipment manufacturers (OEMs) for the transportation, industrial, medical, information technology, defense and aerospace, and communications markets. It operates manufacturing facilities in North America, Asia and Europe. Its products perform specific electronic functions for a given product family and are intended for use in customer assemblies. The Company’s products consist principally of sensors and actuators used in passenger or commercial vehicles; electronic components used in communications infrastructure, information technology and other high-speed applications; switches and potentiometers supplied to multiple markets, and fabricated piezoelectric materials and substrates used primarily in medical, industrial, defense and aerospace, and information technology markets.

Methode Electronics Company Profile

Methode Electronics, Inc. (Methode) is a manufacturer of component and subsystem devices. The Company designs, manufactures and markets devices employing electrical, radio remote control, electronic, wireless and sensing technologies. The Company operates through segments, including Automotive, Interface, Power Products and Other. The Automotive segment supplies electronic and electro-mechanical devices and related products to automobile original equipment manufacturers (OEMs). The Interface segment provides a range of copper and fiber-optic interface and interface solutions. The Power Products segment manufactures braided flexible cables, current-carrying laminated bus devices, custom power-product assemblies, such as PowerRail solution, high-current low voltage flexible power cabling systems and powder coated bus bars. The Other segment includes medical devices, inverters and battery systems, and insulated gate bipolar transistor solutions.

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