We came across a bullish thesis on Cooper-Standard Holdings Inc. (CPS) on Substack by Busy Investor Stock Reports. In this article, we will summarize the bulls’ thesis on CPS. Cooper-Standard Holdings Inc. (CPS)'s share was trading at $15.76 as of Feb 26^th. CPS’s trailing and forward P/E were 4.26 and 62.89 respectively according to Yahoo Finance.

Cooper Standard has aggressively cut costs, positioning itself for a strong financial recovery despite industry challenges. While revenue declined, the company significantly improved profitability, demonstrating its ability to navigate downturns effectively. In Q4 2024, sales fell 1.9% year-over-year to $660.8 million, yet net income surged to $40.2 million, a $95.4 million improvement. For the full year, revenue dropped 3.0% to $2.73 billion, but net losses shrank by $123.2 million, highlighting management’s success in stabilizing the business. Free cash flow reached $25.9 million, underscoring its improving financial health and ability to generate liquidity.

Despite projecting lower vehicle production for 2025, which runs counter to industry forecasts, Cooper Standard expects EBITDA growth of 20%, reflecting the sustainability of its cost-cutting measures. This conservative guidance, likely an example of sandbagging, sets the stage for potential earnings beats. Additionally, revenue per vehicle increased from $175 to $190, further supporting margin expansion. The company’s ability to maintain profitability at lower production levels suggests that even a modest industry rebound could drive significant cash flow gains.

Broader market trends, including increasing dealer incentives, an aging vehicle fleet, and strong actual sales figures, indicate that production may be higher than Cooper Standard’s forecasts suggest. If volumes rise even slightly, the company’s leaner cost structure could translate into substantial earnings growth. With a dramatically improved balance sheet and a clear path to higher margins, Cooper Standard presents a compelling investment opportunity. The stock remains undervalued on key metrics such as price-to-sales and free cash flow, offering an asymmetric risk/reward profile.

Cooper-Standard Holdings Inc. (CPS) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 14 hedge fund portfolios held CPS at the end of the third quarter which was 7 in the previous quarter. While we acknowledge the risk and potential of CPS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CPS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.