Key Tronic Corp. (KTCC) provides electronic manufacturing services (EMS) to original equipment manufacturers (OEMs). The company also manufactures computer keyboards and other peripherals.
KTCC currently trades at a steep 41% discount to net tangible assets. With 10.3 million shares outstanding, KTCC has a market cap below $27 million at today’s closing price of $2.60/share. The company is profitable and racks up $200 million in annual sales. Book value is over $45 million, and net tangible assets exceed $44.5 million. KTCC has a quick ratio of 1.25, so the company does not have any liquidity constraints.
When KTCC announced second quarter earnings, they provided guidance for the third quarter of $49-$51 million in revenues and EPS of $0.05-$0.08. President and Chief Executive Officer Jack Oehlke said, “We expect over 10 new customer programs to be generating revenue by the end of the fiscal year. Our more diversified customer portfolio, spanning a wide range of industries, represents the cornerstone of our long-term strategic plan. We are pleased with our progress and excited about our potential for profitable growth.”
KTCC is anticipated to report third quarter earnings results tomorrow after hours. Given the current dramatic pricing imbalance in the shares, KTCC would seem to have limited downside risk going into earnings, and substantial upside potential.
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