Sensata Technologies (NYSE:ST) is an example of what happens when a high-expectations story doesn't live up to those expectations. While the company has performed reasonably well since my last update from a financial/operating perspective, the shares are down about 7% since my last update and down about 12% this year as investors have come to realize that auto sales can't grow to the sky.
I do believe this may be a good time to do some due diligence on Sensata. The company still has strong positions in its addressed sensor and control markets, and sensors offer some respectable long-term margin opportunities. What's more, there's a lot more Sensata can do to grow its business outside of autos, while also leveraging the benefits of past acquisitions. If Sensata can pair mid single-digit revenue growth with high single-digit FCF growth, these shares look undervalued today and priced for a double-digit annualized return.
Sensata Technologies Has Cooled, And That May Be An Opportunity