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November 9, 2005 Stock Pick: Key Tronic Corporation (KTCC)

Stock Price: $3.34

Key Tronic is a leading contract manufacturer offering value-added design and manufacturing services from its facilities in the United States, Mexico and China. The Company provides its customers full engineering services, materials management, worldwide manufacturing facilities, assembly services, in-house testing, and worldwide distribution.

The company reported earnings on November 1st with revenue of $44.3 million and net income of $702,000. This net income figure was up 166% from the same period a year ago. Key Tronic is well positioned to take advantage of long term growth within the industry as their production efficiencies improve and costs continue to be controlled.

KTCC's balance sheet still needs work and may be the reason for the company being valued at only $32.3 million when they are making much more than that in revenue. Cash is low but the company is profitable and operating cash flow positive. The real reason may be that no one really knows about KTCC. KTCC is trading at a P/E of only 7 and has a book value of $2.85.

Undervalued manufacturing stocks that many would consider boring have been moving as of late. KTCC is at a near perfect point to buy and wait for a move higher. It will become discovered and deserves to be trading at much higher multiples.

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