TTM Technologies has had an impressive run over the past six months. While the S&P 500 has been flat, the stock has returned 25% and now trades at $23.39. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is there a buying opportunity in TTM Technologies, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

We’re glad investors have benefited from the price increase, but we're cautious about TTM Technologies. Here are three reasons why there are better opportunities than TTMI and a stock we'd rather own.

Why Do We Think TTM Technologies Will Underperform?

As one of the world's largest printed circuit board manufacturers with facilities spanning North America and Asia, TTM Technologies (NASDAQ: TTMI) manufactures printed circuit boards (PCBs) and radio frequency (RF) components for aerospace, defense, automotive, and telecommunications industries.

1. Long-Term Revenue Growth Disappoints

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, TTM Technologies’s sales grew at a sluggish 2.7% compounded annual growth rate over the last five years. This was below our standards.

2. EPS Growth Has Stalled Over the Last Two Years

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

TTM Technologies’s flat EPS over the last two years was weak. On the bright side, this performance was better than its 1.1% annualized revenue declines.

3. Previous Growth Initiatives Haven’t Impressed

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

TTM Technologies historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 4.4%, lower than the typical cost of capital (how much it costs to raise money) for business services companies.

Final Judgment

TTM Technologies doesn’t pass our quality test. With its shares beating the market recently, the stock trades at 11.8× forward price-to-earnings (or $23.39 per share). At this valuation, there’s a lot of good news priced in - you can find better investment opportunities elsewhere. We’d recommend looking at one of our top software and edge computing picks.

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