Have you been paying attention to shares of Strattec Security (STRT)? Shares have been on the move with the stock up 15% over the past month. The stock hit a new 52-week high of $43.27 in the previous session. Strattec Security has gained 68% since the start of the year compared to the 11.6% move for the Zacks Auto-Tires-Trucks sector and the -19.7% return for the Zacks Automotive - Original Equipment industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on November 4, 2024, Strattec Security reported EPS of $0.92 versus consensus estimate of $0.56.

For the current fiscal year, Strattec Security is expected to post earnings of $2.76 per share on $537.6 million in revenues. This represents a -32.19% change in EPS on a -0.03% change in revenues. For the next fiscal year, the company is expected to earn $2.78 per share on $560.2 million in revenues. This represents a year-over-year change of 0.72% and 4.2%, respectively.

Valuation Metrics

Strattec Security may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Strattec Security has a Value Score of A. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 15.4X current fiscal year EPS estimates, which is a premium to the peer industry average of 14.2X. On a trailing cash flow basis, the stock currently trades at 5.3X versus its peer group's average of 5.5X. Additionally, the stock has a PEG ratio of 1.54. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Strattec Security currently has a Zacks Rank of #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Strattec Security fits the bill. Thus, it seems as though Strattec Security shares could have potential in the weeks and months to come.

How Does STRT Stack Up to the Competition?

Shares of STRT have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is XPEL, Inc. (XPEL). XPEL has a Zacks Rank of # 2 (Buy) and a Value Score of C, a Growth Score of B, and a Momentum Score of C.

Earnings were strong last quarter. XPEL, Inc. beat our consensus estimate by 1.89%, and for the current fiscal year, XPEL is expected to post earnings of $2.04 per share on revenue of $418.08 million.

Shares of XPEL, Inc. have gained 17.5% over the past month, and currently trade at a forward P/E of 26.66X and a P/CF of 19.82X.

The Automotive - Original Equipment industry may rank in the bottom 62% of all the industries we have in our universe, but there still looks like there are some nice tailwinds for STRT and XPEL, even beyond their own solid fundamental situation.

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