Cti Industries (NASDAQ:CTIB)

Significant development

CTIB has haunted us from the first day it elusively crept its way into our portfolio. We have always seemed to get sucked into it after it reported a good quarter or two, only to be blindsided by several sub par quarters. The year 2008 was case and point. We were excited to follow the story in the beginning of 2009 due to the addition of a new product line and strong analyst estimates which resulted in a strong 2008 third quarter:

GeoInvesting Research Excerpt, January 6, 2009:

The recent Third Quarter report showed strong growth in sales and earnings. All segments seem to be performing well due to recession resistant components. In particular, their new product line of vacuum storage bags is benefiting from an exclusive long term contract with SC Johnson and may be able to give the company some needed earnings consistency.

Margin Picture Set to Improve:

"With the recent decline in the market price of oil and latex, we are now beginning to see reductions in our raw materials costs."

Our enthusiasm was quickly deflated when the company reported three straight quarters of reduced sales and EPS, while missing analyst estimates.

Once again, CTIB has snuck in two good quarter in row, culminating in a record 2010 first quarter:

Is this turn for real and sustainable?

We listened to the conference call for some answers:

The company has changed its product mix which has resulted in increased sales volumes and margins. When asked if this trend would continue, management did its best to sidestep the question. However, it seemed a slightly less non-committal than in previous calls, possibly inferring that EPS consistency may be in the cards. Management also commented that CTIB has a robust product pipeline that has yet to show up in the company's bottom line. Thus, we are going out on the limb once again. This time we will code CTIB as a GeoSpecial. In the slight chance that CTIB has turned the corner, the stock small float of 1 million shares could mean big rewards for risk tolerant investors with a strong stomach and a good sense of humor.