Consumers are becoming more and more accustomed to being completely connected. We want to control our electronics, adjust the thermostat, close the garage, and lower the shades — all from the comforts of our couches. 

#-ad_banner-#As a result, our homes are becoming smarter and smarter. Some of the world’s biggest players are looking to get into the home automation space. 

Last week, Google (Nasdaq: GOOG) said it would buy Nest Labs, a maker of smart thermostats and smoke detectors, for over $3 billion. The likes of Comcast (Nasdaq: CMCSA) and Microsoft (Nasdaq: MSFT) have already been showing interest with acquisitions and in-house developments. 

There’s a reason there’s suddenly so much interest in home automation. The industry is expected to soar from its current estimated value of $570 million to $2.6 billion in 2017, according to ABI Research. 

So what’s the best pure play on this booming market? It appears to be Control4 Corp. (Nasdaq: CTRL). 

With nearly three dozen patents, the company is at the forefront of the “connected home” concept, with products for controlling lighting, music, video, temperature, security and communications. Control4’s home automation software automatically finds and adds devices, which cuts down on the time it takes to connect them.

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	Control4 currently sells its products in more than 80 countries. The company also has opportunities in markets other than single-family homes, including the hospitality industry and multi-unit housing.

Although the U.S. housing market has rebounded since the depths of the financial crisis, it hasn’t yet recovered to pre-crisis levels. As housing continues to rebound, more homebuyers are opting for the latest and greatest in home automation. This is the perfect market opportunity for Control4, whose products are currently in about 135,000 homes. The company’s biggest opportunity, however, is the 94 million U.S. households with incomes of less than $100,000.

According to ABI Research, North America is the world’s largest market for mainstream home automation. The U.S. residential market continues to be the focus for Control4, accounting for more than three-quarters of its revenue. However, there’s plenty of room for the North American home automation market to grow, which is why Control4 has been building its sales force. Gaining more dealers and greater brand exposure should be one of the big revenue drivers for the company. 

Beyond the North American market, there is still a big opportunity for international growth: Control4 currently sells its products in more than 80 countries. The company also has opportunities in markets other than single-family homes, including the hospitality industry and multi-unit housing.

Control4 also has been expanding its partnerships. At this month’s International Consumer Electronics Show, TiVo (Nasdaq: TIVO) announced it would team with Control4 to offer its recording services through Control4 devices. In addition, Control4 inked deals with Nest and Dish Network during the third quarter to help develop their own home integration software. 

A look at Control4’s balance sheet shows it has over $82 million in cash, equal to $3.62 a share, and only $3.3 million in debt. At current prices, 13% of its market cap is covered by its cash balance, which gives the company a nice cushion. With the company already profitable and expected to post earnings per share (EPS) of $0.33 this year and $0.43 next year, there is no burn rate that we have to worry about. Cisco Systems (Nasdaq: CSCO) has also given Contro4 a vote of confidence with its ownership stake of 7.4%.

Risks to Consider: The biggest risk we see is that the home automation space is about to get more crowded. Not only are Silicon Valley startups like Nest getting in on the action, but big players are looking for their share, too. 

Action to Take –> Buy Control4 with upside to $35. A competing home automation company, Universal Electronics (Nasdaq: UEIC), is up 100% over the past 12 months — but Universal’s EPS is expected to grow by 17% next year. Compare that with Control4’s expected EPS growth of 30%. In addition, the five analysts who follow Control4 all have “buy” ratings, and with the recent pullback in the stock, the upside is over 25% from current levels.

P.S. If the potential of home automation has you excited, wait until you see what StreetAuthority’s Andy Obermueller has been working on. Andy has identified five “game-changing” trends with the potential to revolutionize the way we live our lives — and make early investors a killing. Among other things, these technological developments: robots that perform surgery with microscopic precision… machines that can “replicate” objects seemingly out of thin air… and a pair of technologies that will change the face of transportation forever. To learn more about these developing technologies — and the companies behind them — follow this link.