Recoton: The Right Connections?

Recoton, a major marketer of consumer-electronic accessory products, has weathered the recession far better than its peers. The earnings slump continued into 1992 for most of the industry, but Recoton has been in high gear. As a result, its stock is up from 13 a share in June to 18. But some big investors are far from content. They believe the stock has yet to reflect Recoton's upbeat drive.

"For a company that has demonstrated tremendous growth, Recoton is too cheap at its current price," says Eric Kuby, chief investment officer at Rodman Advisory Services. In the third quarter ended Sept. 30, Recoton, a supplier of more than 1,000 accessories for the hookup, maintenance, and enhancement of VCRs, personal computers, and telephones, posted a 68% earnings jump, to 37 cents a share.

Kuby expects full-year Recoton earnings of $1.35 a share this year and $1.50 in 1993, vs. last year's 90 cents. Based on 1993 earnings, he says, the stock deserves a price-earnings ratio of 15, or a stock price of 22 1/2. In 12 months, he sees it trading at a 20 p-e, which would kick the stock up to 30.

Acquisitions account for part of Recoton's growth. Its biggest catch yet is Ambico, a major distributor of camcorder and video accessories, acquired in October. Analyst William Jelin of Hamilton Investments sees Ambico adding as much as 40 cents to his 1993 estimate of $1.50. He also expects big future cost savings from an expansion of Recoton's Lake Mary (Fla.) plant that services a growing list of customers, including Casio, Philips, and 3M.

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