Breaking Down Strattec Security Corporation (STRT) Financial Health: Key Insights for Investors

You're looking at Strattec Security Corporation (STRT) and wondering if the operational turnaround is real, and honestly, the Fiscal Year 2025 numbers defintely suggest it is. The company didn't just tread water; they delivered measurable improvements, posting full-year revenue of $565.1 million, which is a solid 5.1% jump from 2024, and more importantly, net income surged to $18.7 million, a 14% increase. That's not just a revenue story; that's a profitability story, backed by a gross margin expansion of 280 basis points to 15.0% for the year. Here's the quick math: they are generating cash, with $71.7 million in cash from operations for FY 2025, which translates directly to a much healthier balance sheet featuring $84.6 million in cash to weather any near-term market tempering. We need to dig into how they achieved that margin improvement-was it pricing power or just cost-cutting-because a strong cash position is great, but sustainable earnings per share (EPS) of $4.64 requires an enduring strategy.

Revenue Analysis

You want to know if Strattec Security Corporation (STRT) is growing revenue, and more importantly, where that growth is actually coming from. The short answer is yes, the top line is expanding, and it's being driven by a clear shift toward higher-value products and better pricing power, which is a defintely positive sign for investors.

For the fiscal year (FY) ending June 29, 2025, Strattec Security Corporation reported total annual revenue of $565.07 million. This represents a year-over-year growth rate of 5.08%, a solid step up from prior periods. But the more compelling story is the recent momentum: in the first quarter of fiscal year 2026 (Q1 FY2026), net sales hit $152.4 million, an impressive 10% increase compared to the same quarter last year. That's a strong acceleration.

The company's primary revenue streams come from designing and manufacturing automotive access control products. While the company reports as a single segment, the product mix is where you see the strategic focus. The growth is concentrated in key product lines, signaling successful execution of their business transformation plan.

• Power Access Solutions: This category, which includes components like power liftgate and sliding door systems, accounted for 25% of sales in Q1 FY2026.
• User Interface Controls: Products like electronic switches and control panels also made up 25% of sales in the same period.
• Door Handles & Exterior Trim: These traditional but increasingly complex components continue to be a core contributor.
• Keys & Locksets: The foundational security products remain a stable part of the mix.

Here's the quick math on what drove the Q1 FY2026 sales increase of $13.3 million:

What this breakdown shows is a significant change: the growth isn't just volume-driven; it's quality growth. The $3.9 million from pricing and the $3.0 million from favorable mix and higher content per vehicle are critical. This means Strattec Security Corporation is successfully passing on costs and selling a richer mix of products, like their more advanced power access solutions, which is boosting margins. You can read more about the institutional players betting on this shift in Exploring Strattec Security Corporation (STRT) Investor Profile: Who's Buying and Why?

Also, the new program launches, which contributed $2.1 million to the sales increase, confirm that their investment in new technology is translating into immediate revenue. This is how you build a more predictable, higher-performing business, moving beyond just the cyclical nature of auto production. The top line is getting healthier.

Profitability Metrics

You're looking for a clear picture of Strattec Security Corporation (STRT) profitability, not a dense accounting textbook. Here's the direct takeaway: for Fiscal Year 2025, Strattec significantly improved its Gross Margin, but its Net Profit Margin of just 3.3% still signals a tight operating environment, especially when compared to the broader industry.

The company's full-year Net Sales hit $565.1 million. This top-line figure is important, but the true story is what they kept. We need to look at the three key margins-Gross, Operating, and Net-to see where the money is really made or lost. The numbers show a business successfully tackling its cost of goods sold (COGS), but still facing pressure on overhead and non-operating expenses.

Here's the quick math on Gross Profit: with Net Sales of $565.1 million and a Gross Margin of 15.0%, Strattec generated about $84.77 million in Gross Profit. That margin is the first line of defense, showing a solid command over manufacturing and material costs.

Operational Efficiency and Margin Trends

The trend in profitability is defintely the most compelling part of the story. Strattec's management has been laser-focused on operational efficiency, and it's paying off at the Gross Profit level. The Gross Margin of 15.0% for Fiscal Year 2025 represents a 280 basis point improvement year-over-year. That's a huge move in a mature industry like auto components, driven by new annualized pricing actions and restructuring efforts that took out about $5 million in costs.

The real operational picture, however, is best captured by looking at the gap between Gross Margin and Net Margin. The Selling, Administrative, and Engineering (SAE) expenses-the overhead-are what shrink that 15.0% Gross Margin down to the 3.3% Net Margin.

• Improve Gross Margin: 15.0% for FY2025, up 280 basis points.
• Cut Costs: Achieved $5 million in annualized restructuring savings.
• Face Headwinds: Tariffs are a persistent risk, estimated to be a $5 million to $7 million increase in costs before mitigation efforts.

For a proxy of true operational profit, we can look at the Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margin. For the fourth quarter of FY2025, that margin was 8.5%. This higher figure indicates that the core business is more profitable, but depreciation, amortization, interest, and taxes are taking a substantial bite out of the bottom line.

Industry Comparison and Actionable Insight

Strattec Security Corporation's Net Margin of 3.3% is tight, especially when you compare its operating performance to the broader global automotive supplier industry. The industry average EBIT (Earnings Before Interest and Taxes) margin-which is essentially Operating Margin-was estimated to drop to around 4.7% in 2024.

While Strattec's Gross Margin is respectable, the relatively low Net Margin suggests the company is trading slightly below the industry average on an operating basis, or is carrying a heavier burden of non-operating costs (like interest or taxes) than its peers. The key is that the margin expansion is happening now, driven by internal transformation. The focus for investors should be on whether management can continue to manage that SAE spend and mitigate tariff impacts to push the Net Margin closer to the industry's operating average.

You can see more on the investor base and market perception by Exploring Strattec Security Corporation (STRT) Investor Profile: Who's Buying and Why?

Next Step: Check the full-year 2025 financial statements for the exact Income from Operations figure to confirm the Operating Margin.

Debt vs. Equity Structure

Strattec Security Corporation (STRT) operates with an exceptionally conservative capital structure, prioritizing equity and cash over debt financing. This is a clear signal of management's focus on financial flexibility, which is smart given the automotive industry's cyclical nature and the current uncertainty around the electric vehicle (EV) transition. The company's financial leverage is minimal, with a Debt-to-Equity (D/E) ratio sitting at a mere 1.95% as of the first quarter of fiscal year 2026 (ended September 28, 2025).

To put that 1.95% figure in perspective, the average Debt-to-Equity ratio for the broader Auto Parts industry is around 0.59, or 59%. Strattec Security Corporation is barely using debt, relying almost entirely on shareholder equity and retained earnings to fund operations and growth initiatives. This ultra-low leverage is a defintely a strength for navigating near-term market volatility.

Here's the quick math on their debt and equity as of September 28, 2025, which provides the clearest picture of their balance sheet health:

• Total Debt: $5.0 million
• Total Shareholders' Equity: $255.779 million
• Debt-to-Equity Ratio: 1.95%

The company's debt profile is remarkably lean, with all outstanding borrowings being short-term and tied to its joint venture operations. Strattec Security Corporation itself had no borrowings outstanding under its main $40 million revolving credit agreement at the end of the first quarter of fiscal 2026. The total debt of $5.0 million is classified as the current portion of borrowings under credit facilities, meaning there is effectively $0 in noncurrent (long-term) debt on the balance sheet.

This preference for equity and cash-the company reported a substantial $90.5 million in cash and cash equivalents at the end of Q1 FY2026-shows a deliberate strategy to maintain a fortress balance sheet. They are funding their business transformation and investments in new product programs like smart vehicle access solutions from internal cash flow and equity, rather than external debt. This strategy limits interest expense and frees up cash flow for operations and strategic investments, which you can read more about in their Mission Statement, Vision, & Core Values of Strattec Security Corporation (STRT).

In a tangible sign of their proactive financial management, Strattec Security Corporation executed a key refinancing action very recently. On October 27, 2025, the company entered into a new revolving credit agreement, replacing the existing $40 million facility. This action extends their access to capital and pushes the maturity date out significantly to October 2028, providing a solid runway for their operational plans. The new facility bears interest at SOFR plus an applicable margin of 1.50%, locking in favorable terms for their potential future borrowing needs.

What this estimate hides is the opportunity cost of not using any debt to boost returns, but the benefit of near-zero financial risk outweighs that in a choppy market. The table below summarizes the key components of the company's financing structure:

Liquidity and Solvency

Strattec Security Corporation (STRT) shows a very healthy liquidity position as of the end of fiscal year 2025, which gives them significant financial flexibility. The company's ability to cover its short-term obligations is strong, and the cash flow generation is at a record high, which is exactly what you want to see during a business transformation.

The company's liquid assets are robust, far exceeding its current liabilities. The Current Ratio for Strattec Security Corporation (STRT) is 2.43, meaning it holds $2.43 in current assets for every dollar of current liabilities. Even more telling is the Quick Ratio (or Acid-Test Ratio), which excludes inventory-often the least liquid current asset-coming in at 1.89. A quick ratio near 1.0 is generally considered acceptable, so 1.89 shows a defintely comfortable margin of safety. This is a very strong liquidity profile, well above the typical 1.0 benchmark for solvency.

Working capital trends show a clear focus on efficiency, which is a key driver of liquidity. Management actively reduced the working capital (current assets minus current liabilities) as a percentage of sales from approximately 22% at the start of the fiscal year to a little over 16% by the end of FY2025. This improvement was driven by better working capital management and, notably, a reduction in pre-production tooling cost balances by $10.5 million in the first half of the year alone. It shows they are getting paid faster and managing their balance sheet better. Mission Statement, Vision, & Core Values of Strattec Security Corporation (STRT).

Here's the quick math on their cash position and operational strength:

The cash flow statement overview for Strattec Security Corporation (STRT) is overwhelmingly positive. The Operating Cash Flow (OCF) for the full fiscal year 2025 hit a record $71.7 million. This massive cash generation is the best indicator of a healthy core business, as it means profits are turning into real cash. For context, OCF for the nine-month period was already $41.5 million.

On the investing side, Capital Expenditures (CapEx) were anticipated to be around $15 million for the fiscal year. This suggests a healthy Free Cash Flow (OCF minus CapEx) of roughly $56.7 million ($71.7 million - $15 million), which is a huge number for a company of this size. The financing cash flow is also clean; the company ended Q1 FY2026 (September 28, 2025) with a total debt of only $5.0 million (joint venture debt) and $90.5 million in cash. They have $47 million available under their lines of credit.

There are no immediate liquidity concerns.

• Liquidity is a major strength, not a concern.
• The high current ratio (2.43) and quick ratio (1.89) provide a substantial buffer against market volatility.
• Record-setting operating cash flow ($71.7 million) provides ample internal funding for CapEx and transformation initiatives.
• The balance sheet is nearly debt-free, with $84.6 million in cash at year-end FY2025 and an additional $52 million in untapped credit capacity.

Valuation Analysis

You want to know if Strattec Security Corporation (STRT) is overvalued or undervalued right now. Based on the fundamental metrics and the analyst consensus as of November 2025, the stock appears to be undervalued, especially when you look at its enterprise value and book value. This suggests a compelling value opportunity, but you must still watch the cyclical nature of the auto industry.

The core of the value argument rests on three key ratios, which are all sitting well below industry averages for the Automotive - Original Equipment sector. Here's the quick math using the latest available data, with the stock trading around $64.46 per share as of mid-November 2025:

• Price-to-Earnings (P/E) Ratio: The trailing twelve-month (TTM) P/E is about 14.11, based on the strong Fiscal Year 2025 diluted EPS of $4.58. This is significantly cheaper than the broader market average P/E of around 38.15. The forward P/E (FWD) is even lower at 12.32, signaling expected earnings growth.
• Price-to-Book (P/B) Ratio: At just 1.06, the P/B ratio is incredibly low. This means the market is valuing the company's stock at barely more than its net assets (book value) per share. Honestly, a P/B this close to 1.0 often flags a deep value stock or one with significant unrecognized asset value.
• Enterprise Value-to-EBITDA (EV/EBITDA): This is arguably the most telling metric for an industrial company like STRT. The TTM EV/EBITDA is a very attractive 4.4. This low multiple implies the company is cheap relative to its operating cash flow (earnings before interest, taxes, depreciation, and amortization, or EBITDA).

The low valuation multiples, especially the EV/EBITDA, point to a stock that is defintely not overvalued. In fact, one notable analyst model suggests an intrinsic value implying the stock is 46.6% undervalued.

Stock Trend and Analyst Sentiment

The market has clearly recognized some of this value over the last year. Strattec Security Corporation's stock price has climbed by a substantial 54.91% over the last 12 months, moving from its 52-week low of $31.57 to its current range. Still, it remains well below its 52-week high of $83.00.

Wall Street analysts are generally bullish, which confirms the value thesis. The consensus rating is a Moderate Buy, with a highly respected rating agency assigning a Strong Buy rank. The average one-year price target is set at $81.60. To be fair, that target represents a potential upside of over 25% from the current price, which aligns with the view that the stock is undervalued.

What this estimate hides is the fact that Strattec Security Corporation is not a dividend stock; it does not currently pay a regular dividend, having last paid one in March 2020. So, your returns will come purely from capital appreciation, not income. Plus, the Price-to-Earnings Growth (PEG) ratio is 1.23, which is a healthy number suggesting the stock's growth rate is keeping pace with its P/E ratio, further supporting the undervalued argument.

For a deeper dive into the company's operational improvements and balance sheet strength, you should read the full post: Breaking Down Strattec Security Corporation (STRT) Financial Health: Key Insights for Investors.

Risk Factors

You're looking at Strattec Security Corporation (STRT) and seeing a strong balance sheet, but you have to look past the headline numbers to the risks that could derail their transformation. The biggest near-term headwinds are the volatile automotive market and the persistent pressure from U.S. trade policies, specifically tariffs (import taxes). Strattec is defintely not immune to the broader industry slowdown or the cost of doing business globally.

The core of the risk profile is external. Strattec operates in the cyclical and competitive automotive component industry. If a major customer like Ford or General Motors cuts production, Strattec's sales suffer immediately. Plus, the shift to electric vehicles (EVs) introduces technological risk: their legacy mechanical lock and key systems could become obsolete if they don't secure enough content on new EV platforms. That's a huge strategic pivot they must execute.

• Automotive industry production cuts hurt revenue.
• Technological change (EVs) pressures legacy product lines.
• Raw material cost spikes compress gross margins.

The company has been very transparent about the financial impact of trade policy. In Fiscal Year 2025, Strattec estimated the incremental cost from tariffs alone was between $5 million and $7 million before mitigation efforts. That's a material hit on a full-year net income of $18.7 million for the same period. To be fair, they are actively managing this, but the risk of trade policy shifting again is an ongoing concern.

Here's the quick math on their internal mitigation efforts. Strattec has been aggressive on cost structure, reducing its total headcount by 12% in the first nine months of Fiscal 2025. They also implemented restructuring actions, including in their Mexico operations, which are expected to generate approximately $5 million in annual cost reductions, fully realized by the first quarter of Fiscal 2026. That $5 million in savings is a direct offset to the tariff risk, which is a clear action plan.

The strong balance sheet is a major buffer against these risks. The company ended Fiscal 2025 with a cash and cash equivalents balance of $84.6 million and very limited debt, which gives them the financial flexibility (or runway) to manage market volatility and invest in new product development. Still, operational execution risk remains high as they integrate new processes and systems while maintaining production quality.

For a deeper dive into who is betting on this turnaround, check out: Exploring Strattec Security Corporation (STRT) Investor Profile: Who's Buying and Why?

You can see the direct trade-off between the external cost pressures and the internal cost savings in the table below, using key Fiscal 2025 data.

Growth Opportunities

You want to know where Strattec Security Corporation (STRT) goes from here, especially after a solid fiscal year 2025. The direct takeaway is this: the company's future growth is less about a booming auto market and more about its internal operational overhaul and securing content on next-generation, powertrain-agnostic vehicle platforms.

Strattec Security Corporation is actively transforming its cost structure to lock in higher margins, which is a key lever for future earnings. In fiscal year 2025, the company reported total revenue of US$565.1 million, a 5.1% increase over the prior year, with net income hitting US$18.7 million. That's a 14% jump, showing the early wins from their efficiency drive. Analysts are projecting revenue to grow at an average of 6.4% p.a. over the next three years, a realistic and defintely achievable target given the current initiatives.

Operational Efficiency and Product Innovation as Growth Drivers

The biggest near-term opportunity isn't a massive market expansion, but rather a deeper dive into operational efficiency (cost reduction) and increasing their content-per-vehicle (product innovation). They've already executed on this, as seen in the Q1 fiscal 2026 results where net sales grew nearly 10% to $152.4 million, driven by a favorable sales mix and new program launches. Here's the quick math on their cost savings and product wins:

• Restructuring efforts are expected to generate approximately $5 million in total annualized savings, stemming from changes like the shift to a two-shift operation in Milwaukee and restructuring in their Mexico operations.
• New program launches contributed $2.1 million to the Q1 FY2026 net sales increase, reflecting success in securing new business.
• They also secured over $8 million in new annualized pricing in FY2025, which helped offset inflation.

Their focus is on modernizing operations through automation, which means higher capital expenditures now but a permanently lower cost base later. This strategic pivot is why the company generated a strong $71.7 million in cash from operations in FY2025, giving them a healthy cash balance of $84.6 million to fund these changes.

Strategic Positioning and Competitive Edge

Strattec Security Corporation's competitive advantage lies in its deep, 110-year history and engineering expertise in vehicle access and security, which has allowed them to transition seamlessly from mechanical to integrated electro-mechanical systems. They are not tied to one type of vehicle, which is crucial in a volatile auto market.

Their product portfolio is powertrain agnostic, meaning their power access solutions, advanced security systems, and user interface controls are relevant across internal combustion engine, hybrid, and electric vehicles. This hedges their risk against the uncertain pace of electric vehicle adoption in the US. Plus, they recently amended their revolving credit facility, extending its maturity to October 2028, which gives them financial breathing room to execute their modernization plans.

The table below summarizes the core financial health metrics that underpin their growth story, showing a business that is getting leaner and more profitable.

For a deeper dive into the valuation and risk profile, check out the full post: Breaking Down Strattec Security Corporation (STRT) Financial Health: Key Insights for Investors.

Next Step: Finance: Model the impact of the full $5 million in annualized cost savings on the FY2026 gross margin projections by next Wednesday.