Control4 Stock: Consistent Growth With 50% Upside Potential
Control4 Stock: An IoT Play Flying Under the Radar
An emerging technology growth area is the home automation Internet of Things (IoT) segment, as household devices become increasingly interconnected.
At this time, homeowners can control security systems, temperature, lighting, entertainment, and other connected devices via a smartphone or control panel.
My view is that the tailwinds for the home automation IoT market are just beginning to pick up and will gather steam as technologies advance.
A small-cap play that looks intriguing is Control4 Corp (NASDAQ:CTRL), which provides a home automation platform that can be used with over 10,000 third-party consumer electronics products. Control4’s network is extensive and comprises about 90 countries. Solutions are geared to the higher-end automation market.
CTRL stock is underperforming the S&P 500 this year, declining 17%, but up 68% over the past year and easily beating the index.
Chart courtesy of StockCharts.com
The chart shows this stock holding its 50-day moving average and staying well above the 200-day moving average. If Control4 stock continues to hold the 50-day moving average, we could see a rally back toward the previous highs. The positive trend line is also holding in place.
Watch for Control4 stock to attract some buying support at $24.00 or as low as $20.00. On the upside, a rally offers chart targets of $30.00 and $36.00 for CTRL stock, representing potential gains of 21% to 46%.
My Fundamental Bull Case for CTRL Stock
Growth has been consistently higher over the past few years, and the positive trend in revenues and earnings is expected to continue.
Control4 reported revenue growth of 9.4% in 2015, 27% in 2016, and 17.2% to $244.72 million in 2017.
The positive revenue growth is expected to continue at 11.2% to $272.18 million in 2018 followed by 12% to $304.8 million in 2019. (Source: “Control4 Corporation (CTRL),” Yahoo! Finance, last accessed February 22, 2018.)
CTRL has also been able to deliver gross margins at over 50% from 2014 to 2017, which is helping drive earnings.
The earnings per share (EPS) trend has been rising over the past 90 days, which is bullish.
Control4 is estimated to make $1.23 per diluted share for 2018 and $1.42 per diluted share in 2019, with a high estimate of $1.48 per diluted share.
Analyst Take
Control4 trades at 17.46-times its 2019 EPS versus 41.35-times the trailing EPS. The price/earnings to growth (PEG) ratio of 1.01 indicates that CTRL stock trades at roughly its estimated five-year compound annual growth rate (CAGR) for earnings, which is attractive.
