Tech Stocks to Buy: Lear Corporation (LEA)
Lear Corporation (NYSE:LEA) supplies automakers with seating, electrical distribution systems, electronic modules, sub-systems and software. Some examples of these include wireless systems for keyless entry as well as gateway modules for data transfer. It competes with three of the companies mentioned, including Delphi, TE and Magna International Inc. (USA) (NYSE:MGA).
Lear enjoys high barriers to entry in seating, as McKinsey notes. Automotive seating is heavily regulated for safety purposes, and producers require a great deal of technical expertise involving crash-test regulations, making entry difficult.
Lear Corporation is 1.9% below its 52-week high, and still trades at low multiples. This comes at a time when the market trades at high historic multiples, making it difficult to find quality value stocks. Lear stock trades at 10.9 times earnings, 9.3 times forward earnings and 3.2 times book value. Also, Lear stock trades at a multiple of 0.51 times sales and 8.39 times free cash flow.
Lear is projected to grow earnings at a 13.2% CAGR over the next five years. This insulates Lear from charges of being a value trap, and gives Lear a 0.75 price/earnings to growth multiple.