CTS Corporation (CTS) DCF Valuation & Fundamental Primer
CTS Corporation (CTS) currently trades at $44.50 with an enterprise value of $1.26B. Our proprietary institutional model rates CTS Corporation at 65/100 (Grade: B+ · Quality Software Operator). The current market price prices in an implied 5-year revenue CAGR of 20.7% vs. historical growth of 20.7% (Fairly Priced to Fundamentals).
Institutional fundamental teardown of CTS Corporation (CTS) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
CTS Corporation (CTS) 3-Scenario DCF Valuation Range
Stress-test CTS's 5-year growth, target FCF margin, WACC, terminal methodology, and SBC/dilution friction in real time.
Split between 5-Year Explicit Cash Flows and Discounted Terminal Value
2D Institutional Valuation Sensitivity Heatmap
Implied share price & upside/downside spread across 25 valuation states (Current Price: $44.50).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $49.43 +11% | $52.46 +18% | $55.99 +26% | $60.17 +35% | $65.18 +46% |
| 9.3% | $44.52 +0% | $46.90 +5% | $49.64 +12% | $52.82 +19% | $56.55 +27% |
| 10.0% | $40.48 -9% | $42.40 -5% | $44.57 +0% | $47.05 +6% | $49.92 +12% |
| 10.8% | $37.10 -17% | $38.67 -13% | $40.43 -9% | $42.41 -5% | $44.67 +0% |
| 11.5% | $34.24 -23% | $35.54 -20% | $36.98 -17% | $38.60 -13% | $40.41 -9% |
Institutional Software Quality Scorecard (65/100 · Grade B+)
Solid software model with clear operating leverage, partially offset by standard SBC or moderate burn.
Positive FCF but lower conversion efficiency due to capex or timing
Elevated equity dilution; SBC consumes substantial operating cash flow
High-quality software margins with healthy balanced growth and profitability
Positive net cash cushion; self-funding operations with zero insolvency risk
Core Investment Strengths & Moats
- Healthy unit economics: 73.7% gross margin
- Net cash positive: $66.7M balance sheet buffer
Key Operational & Dilution Risks
- Substantial SBC dilution drag: SBC is 18.4% of revenue ($38.7M)
Reverse-DCF Solver: What Growth is Priced Into CTS?
Market implies 20.7% annual revenue growth over next 5 years (39.3% dilution-adjusted), in line with company run-rate.
Headline Reverse-DCF ignores Stock-Based Compensation (18.4% of revenue) and annual share dilution (1.8%/yr). Accounting for both requires 39.3% 5-year revenue CAGR to justify $44.50/sh on a true per-share economic cash flow basis.
CTS Corporation (CTS) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $210.4M | $210.4M | $254.0M | $306.6M | $370.1M | $446.7M | $539.1M |
| Gross Profit | $155.1M | $155.1M | $187.2M | $226.0M | $272.7M | $329.2M | $397.3M |
| Operating Income (EBIT) | $-5.1M | $-5.1M | $-6.1M | $-7.4M | $-8.9M | $-10.7M | $-12.9M |
| Stock-Based Compensation (SBC) | $38.7M | $38.7M | $46.7M | $56.4M | $68.1M | $82.2M | $99.2M |
| Unlevered Free Cash Flow (FCF) | $44.4M | $44.4M | $53.6M | $64.7M | $78.1M | $94.2M | $113.8M |
| SBC-Adjusted True Cash Flow | $5.7M | $5.7M | $6.9M | $8.3M | $10.0M | $12.1M | $14.6M |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -27.1 + 0.76 × (Rule of 40) · R² = 81%Stocks below the gold regression line trade at a discount relative to their Rule of 40 compounding efficiency.
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| CTS Corporation | CTS | $1.33B | $210.4M | 73.7% | 21.1% | 41.8% | 18.4% | 6.0× |
| ServiceNow | NOW | $152.61B | $10.98B | 79.2% | 31.1% | 54.2% | 15.9% | 13.9× |
| Workday, Inc. | WDAY | $50.35B | $8.00B | 75.0% | 27.4% | 43.9% | 19.0% | 6.4× |
| Salesforce | CRM | $217.10B | $37.90B | 77.2% | 32.8% | 42.8% | 8.4% | 5.8× |
| Datadog | DDOG | $46.05B | $2.68B | 80.8% | 31.1% | 57.7% | 21.3% | 17.4× |
| Snowflake Inc. | SNOW | $71.79B | $3.63B | 66.5% | 25.2% | 57.7% | 40.8% | 20.0× |
| Hubspot | HUBS | $19.89B | $2.63B | 85.0% | 21.3% | 52.7% | 19.2% | 7.7× |
| Peer Cohort Median Benchmark (N=6) | 78.2% | 29.2% | 53.5% | 19.1% | 10.8× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 6.0× | $1.26B | $1.33B | $44.50 | 0.0% |
| -20% Multiple Compression | 4.8× | $1.01B | $1.07B | $36.05 | -20.0% |
| -35% Multiple Compression | 3.9× | $818.4M | $885.1M | $29.71 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $1.05B | $1.12B | $37.56 | -16.4% |
Frequently Asked Questions: CTS Corporation (CTS) Valuation
What is CTS Corporation (CTS)'s intrinsic DCF valuation and implied share price?
Based on audited SEC 10-K/10-Q filings and a 5-year 3-statement discounted cash flow (DCF) model, CTS Corporation (CTS) has a Base Case implied value of $44.57 per share (with a Bear Case of $20.30 and a Bull Case of $78.57), compared to its current price of $44.50. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is CTS Corporation (CTS)'s Rule of 40 score and Free Cash Flow margin?
CTS Corporation achieves a Rule of 40 score of 41.8%, combining a 20.7% revenue growth run-rate with a 21.1% TTM free cash flow margin on $210.4M in trailing twelve-month revenue. In the Software & Cloud Services peer cohort, the median Rule of 40 benchmark is 53.5%.
What revenue growth rate is priced into CTS stock according to Reverse-DCF analysis?
At $44.50 per share (Enterprise Value of $1.26B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 20.7%, compared to CTS Corporation's historical CAGR of 20.7%. Overall market expectations are rated as "Fairly Priced to Fundamentals".
How does CTS Corporation compare to Software & Cloud Services software peers?
CTS Corporation (CTS) earns an institutional Software Quality Score of 65/100 (Grade B+ — Quality Software Operator). Across its Software & Cloud Services peer group (NOW, WDAY, CRM, DDOG, SNOW), the cohort trades at a median EV/TTM Revenue multiple of 10.8× and a median gross margin of 78.2%.
How does Stock-Based Compensation (SBC) impact CTS Corporation (CTS)'s valuation?
CTS Corporation recorded $38.7M in TTM stock-based compensation (18.4% of revenue). When treating SBC as a cash-equivalent compensation expense, CTS Corporation's SBC-adjusted free cash flow yield is 0.4%, scoring 10/25 on our Shareholder Dilution Friction pillar.