May 13, 2019

THRM – Although management has concerns about labor costs and growth, market expectations are far too bearish, suggesting longer-term upside remains warranted


  • Gentherm Incorporated (THRM:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 15.3x Uniform P/E, implying bearish expectations for the firm. While management’s concerns about labor costs and automotive production suggest the potential for near-term headwinds, the firm’s leadership in its space suggest longer-term upside remains warranted
  • Specifically, management may be concerned about wage increases at their Mexican production facilities, and may lack confidence in their ability to sustain medical business sales growth and manage SG&A costs. In addition, they may be downplaying concerns about IHS global automotive production forecasts and CCS Active demand
  • Although management’s concerns about labor costs and automotive production forecasts suggest the potential for near-term headwinds, market expectations for Uniform ROA to decline to levels not seen since the Great Recession appear too bearish, especially given the firm’s historical performance and leadership in its space. As such, multiple expansion and equity upside remain warranted in the long-term.
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