Strattec Stock Up 78% Over the Past Year: Is it Still a Buy Now?

After a nearly 78% run over the past year, Strattec Security STRT may look like a stock that has already made its move. But that’s not the case. The rally seems to have legs thanks to strong fundamentals. The company’s improving margin profile, stronger cash generation, better product mix and inexpensive valuation support a bullish case. The stock carries a Zacks Rank #1 (Strong Buy), reinforcing the favorable near-term setup. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Why The Rally Looks Justified

Strattec’s bullish case starts with execution. In second-quarter fiscal 2026, sales rose 6% year over year to $137.5 million, adjusted EPS jumped to $1.71 from 65 cents, and gross margin expanded 330 basis points to 16.5%. Importantly, the company expects 15-16% gross margin now looks like a more sustainable baseline, supported by pricing, mix and cost actions.

The company is showing healthier earnings power, helped by restructuring, supply-chain efficiencies and manufacturing optimization. Annualized savings from fiscal 2026 restructuring actions are expected to reach about $3.4 million, while back-half selling, administrative and engineering expenses are projected in the 10-11% range.

Cash Flow And Balance Sheet Strength Add To The Appeal

Another reason the stock still looks attractive is financial flexibility. Strattec generated $13.9 million in operating cash flow in the last reported quarter and $25.2 million in the first half of fiscal 2026. It ended the quarter with $99 million in cash and only $2.5 million in debt. Management expects about $40 million in operating cash flow for fiscal 2026, with capex below $10 million.

That balance sheet gives Strattec room to keep investing in automation, process modernization and new customer programs even if auto production remains uneven.

Growth is Getting Better, Not Just Bigger

Importantly, STRT is shifting toward better businesses. Management is prioritizing higher-value areas like power access systems, door handles and digital key solutions, while deprioritizing lower-return businesses such as switches. It is also pursuing new customer wins tied to model-year 2029 and beyond, which could create multi-year revenue streams once programs are awarded.

That product mix upgrade is key. It means Strattec has a path to higher content per vehicle and stronger margins over time, even in a sluggish production backdrop.

Valuation Check

Based on its price/sales ratio, Strattec is trading at a forward sales multiple of 0.56, lower than the broader industry. Meanwhile, close peers like Magna International MGA and BorgWarner BWA are trading at a forward P/S ratio of 0.37 and 0.75, respectively.

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Our Take

While there are near-term risks, long-term narrative for Strattec remains strong. Management expects second-half fiscal 2026 sales to decline 3-4% year over year due to softer U.S. auto production, forex pressure and the lapping of prior pricing actions. But STRT appears better equipped than before to absorb those headwinds thanks to structurally better margins, tighter cost control and a cash-rich balance sheet.

The stock’s 78% rally over the past year does not kill the bull case. In fact, with improving profitability, solid cash generation and still-reasonable valuation, there appears more upside. Strattec stock remains a compelling investment choice now.

The Zacks Consensus Estimate for STRT’s fiscal 2026 EPS implies year-over-year growth of 16%. The EPS estimates have moved north over the past 60 days.

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This article originally published on Zacks Investment Research (zacks.com).

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