Gentex Corp. hits lower rail of trend channel ahead of earnings

Gentex Corp. (Nasdaq: GNTX) is set to release third quarter earnings results on October 18 and the automotive equipment manufacturer is expected to report earnings of $0.42 per share and that would match the results from last year. The company manufactures auto-dimming mirrors, and other electronic items for automobile manufacturers.

Over the last three years, the company has been able to grow earnings at a rate of 16% per year, but earnings are only expected to grow by 4% in 2019. Sales have grown at a rate of 4% per year over the last three years and are expected to increase by 2.8% this year.

Looking at some of the fundamental indicators from Tickeron’s Fundamental Analysis Overview, the Tickeron Profit vs. Risk Rating for Gentex is 24. This indicates low risk on high returns. The average Profit vs. Risk Rating for the industry is 91, placing this stock well above average.

The Tickeron PE Growth Rating for Gentex is 27 and that points to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents. A rating of 1 indicates highest PE growth while a rating of 100 indicates lowest PE growth.

The Tickeron Valuation Rating for Gentex is 33 and that indicates that the company is slightly undervalued in the industry. A rating of 1 points to the most undervalued stocks, while a rating of 100 points to the most overvalued stocks. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization.

The chart for Gentex shows that the stock has been trending higher since late March and a trend channel has formed in the last six months. The stock recently hit the lower rail of the channel as the overbought/oversold indicators have reached oversold territory.

The daily stochastic readings are the lowest they have been since February and they made a bullish crossover on October 9. The 10-day RSI reached its lowest level of the past nine months and has since turned higher.

In addition to the oversold readings from the stochastics and RSI, the stock broke below the lower Bollinger Band earlier in October. In 28 of 44 cases where GNTX's price broke its lower Bollinger Band, its price rose further in the following month. The odds of a continued uptrend are 64%.

Sentiment toward Gentex is rather bearish, especially the analysts’ ratings. There are currently nine analysts covering the stock with only one “buy” rating. There are five “hold” ratings and three “sell” ratings. This puts the buy percentage at 11.1% and that is one of the lowest buy percentages I have seen recently.

The short interest ratio is currently at 3.89 and that is slightly above average.

When viewing the sentiment, I prefer to use it in a contrarian manner, but you don’t want to be contrarian just for the sake of betting against other investors or analysts. The idea is that you have bearish sentiment toward a stock that has been moving higher and a company with strong fundamentals. Gentex certainly seems to fit that scenario.