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Bull Of The Day: Control4 Corp (CTRL)

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Control4 Corporation (CTRL - Free Report) is a Zacks Rank #1 (Strong Buy) and sports a growth style score of A.  As the Aggressive Growth Stock Strategist at Zacks Investment Research, that automatically gets the stock on my radar screen. Let's take a look at why this stock is a Zacks Rank #1 (Strong Buy) in this Bull of the Day article.

Description

Control4 Corporation is engaged in providing automation and control solutions for the connected home. The Company offers home operating system that interacts with various music, video, lighting, temperature, security, and communications. It also provides 4Sight subscription services, which allow consumers to control and monitor their homes remotely from their smartphone, tablet, or laptop. Control4 Corporation is headquartered in Salt Lake City, Utah.

Recent Earnings

The most recent quarter is what I always look at first when checking out a new stock. In the case of CTRL I see a solid beat of 31.3% ahead of the Zacks Consensus Estimate. That is just what I need to see as it tells me that CTRL left a good taste in the mouths of investors.

Earnings Estimates

Following the beat, estimates have moved higher.  In the case of CTRL, estimates have inched higher, and that has come amidst the corrective action in the market.  More on that idea later, but let's take a look at the moves in the Zacks Consensus Estimate.

When you post a big beat, the estimates for the full year move up, but what is really important is that estimate for the current and next quarter move higher too.  We have just that with CTRL as this quarter and next have seen estimates move higher by a penny each.

The 2018 Zacks Consensus Estimate moved from $1.31 to $1.42 following the beat and that move is what really helps push this to a Zacks Rank #1 (Strong Buy).

The 2019 Zacks Consensus Estimate moved by the same amount, running from $1.44 to $1.55.  So with that, we also see some nice implied earnings growth.

Earnings History

Part of the Zacks Rank is looking into the past.  In that regard we a good history of CTRL beating the number.  Four the last four reports has all been beats which tells us management knows how to deliver a message to Wall Street and then live up to it.

Over the past four quarters, the average positive earnings surprise is hefty 33%.

Valuation

With the market in a corrective mode, stocks like CTRL are getting cheaper and cheaper. I see the stock now trading at 19x forward and trailing earnings, and that is a good bit lower than where the multiple was a few weeks ago. Even as the stock price slipped, the estimates moved higher, so that makes price to book moved from 5x down to 4x and bump right up against where a value investor likes to see that metric (typically around 3x or less). 

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