Gentherm Incorporated (NASDAQ:THRM) is a multinational corporation that specializes in the manufacturing of automotive parts and medical devices. Specifically, Gentherm is known for creating the first ever thermoelectric heating and cooling system for vehicles, which allows users to control the temperature of their seat. The company was founded in 1991 and was originally called Amerigon, before changing to Gentherm in 2012. Gentherm operates offices in thirteen different countries across North America, Europe, and Asia. Learn more
The Bullish Case: Gentherm definitely operates in a niche market, but has done well to diversify its own portfolio of products. While the company was the first to introduce climate controlled seats in vehicles, Gentherm also manufactures thermal management technologies for medical equipment as well. With products such as the Blanketrol, Maxi-therm hypothermia blankets, and the Kool Kit Neonate which helps to regulate the temperatures of newborn babies, Gentherm has developed an impressive catalogue for the lucrative medical device field. As far as its automotive clients, according to Gentherm’s 2020 Annual Report, it has an incredibly diverse portfolio where the largest holding is General Motors (NYSE:GM) at 14% of its total customer base. This shows that customer dilution is not an issue for Gentherm, and is indicative of a strong industry moat for its climate control technology. Gentherm has a third branch of business which revolves around manufacturing and the design of circuitry and electromechanic control systems. This process includes circuit design and analysis, testing, approvals and consultations, as well as the automated mechanical manufacturing of finished products.
The Bearish Case: As an investment, potential investors should always be aware that smaller companies like Gentherm are always at risk of being bought out by a larger firm. Judging by its diversified client base, most automakers are happy to just purchase the technology from Gentherm, but perhaps the medical device side of the company is more appealing to a large pharmaceutical conglomerate. While Gentherm does have different sides to their business, they have for the most part placed all of their eggs in one basket. If a new temperature control technology is released by another firm, can Gentherm do enough to stay competitive? Growth is another issue. Can Gentherm continue to expand its operations and gather new clients? There are a finite number of automakers in the world, which means Gentherm may need to rely more on its circuitry and medtech branches for larger growth opportunities.
Final Verdict on Gentherm: The company exhibits a decent amount of strength in the automotive and medtech industries, and its burgeoning circuit design business is a nice compliment. Investors searching for high growth may want to look elsewhere, although with a small company in established markets, one would imagine margins and profit will continue to improve moving forward.