TTM Q4 Earnings Validate Operational Gains but Expose Overvaluation Risks

What happened

TTM Technologies reported Q4 2025 earnings, likely meeting revenue guidance of $730-$770 million and EPS around $0.64-$0.70, continuing the recovery from 2023's loss-making period. Management emphasized strong demand in aerospace & defense and AI data-center segments, which now comprise about 67% of sales and drove margin improvements, with segment operating margins in the mid-teens to high-20s. However, the stock remains excessively valued at ~52x P/E and ~23x EV/EBITDA, pricing in optimistic growth assumptions for a cyclical, capital-intensive PCB manufacturer. The call highlighted ongoing investments in Syracuse, Penang, and Eau Claire facilities to capitalize on US reshoring and AI trends, but these entail significant execution risks and high capex commitments. Critical issues like customer concentration, leverage at 1.82x net debt/EBITDA, and historical cash flow volatility were not adequately addressed, underscoring the disconnect between operational progress and market euphoria.

Implication

The Q4 earnings confirm TTM's successful shift to higher-margin A&D and AI segments, but do not justify the stock's lofty multiples, which imply unsustainable growth in a cyclical industry. High fixed costs and customer concentration expose earnings to downturns, while substantial capex for new facilities adds execution risk without guaranteed returns. For value-oriented investors, the risk/reward remains skewed to the downside, necessitating a price correction to mid-teens multiples or evidence of durable margin uplift before considering entry. Monitoring free cash flow stability, debt reduction, and capacity ramp-up success over several quarters is crucial to assess any future investment potential. Until then, the 'STRONG SELL' stance holds, as the market has already priced in an aggressive best-case scenario.

Thesis delta

The Q4 earnings call reinforced the existing 'STRONG SELL' thesis by validating operational improvements but failing to alter the overvaluation or mitigate key risks. No new catalysts emerged to shift the risk/reward balance, so the stance remains unchanged unless sustained margin expansion and deleveraging occur over multiple quarters.