By Matt Rego
Chances are you have not heard of the semiconductor firm Vishay Intertechnology Inc. (NYSE: VSH), yet they not only have a wide selection of semiconductor solutions but earnings have been stable, along with growth. Vishay makes discrete semiconductors and passive components. Additionally, they make most of their products here in the United States.
Vishay Intertechnology Inc. recently released fourth quarterly earnings on February 5th, which saw the company slightly beating revenue expectations and beating on earnings per share estimates. The company reported revenue of $530.6 million with earnings per share at $0.11. Analysts were looking for revenues of $520.8 million on earnings per share of $0.08. The bad news is that GAAP earnings shrank significantly from fourth quarter a year ago when the company reported revenues of $551.4 million on earnings per share of $0.19.
Ultimately, the quarter is mixed because while the results did beat estimates, they were still much lower than a year ago. More bad news, margins shrank across the board. Gross margin came in at 20.5 percent or 230 basis points less than a year ago. Operating margin came in at 4.1 percent or 310 basis points less than a year ago. Finally, net margin was at 4 percent, 160 basis points less than a year ago. While this is not a reason to hit the sell trigger just yet, it is something that will need to be watched over the next quarter.
Moving on to better news, Vishay shows great fundamentals. The company has a price to earnings of 17 and forward price to earnings of 12. Furthermore, the firm has a PEG of 1.42, price to sales of 0.85, price to book of 1.17 and price to cash of 1.92. Price to free cash flow looks healthy at 13.87. The company is in outstanding financial stability with debt to equity of only 0.24 and cash per share of 7. This translates to a current ratio of 4.35. While Vishay Intertechnology does not currently pay a dividend, there has been some speculation that we could see a dividend sometime in the future, but that remains to be seen. Earnings estimates are expected to fall this year by 44 percent but rise next year by 45 percent and 12 percent the next five years.
Earnings are expected to contract this year but rebound next year and continue growing the next several years. This year is the year to watch for a favorable entry point. Despite the mixed quarterly results and the expected earnings fall, I still stand behind Vishay because of its massive cash reserves and its cutting edge portfolio of semiconductors that will see increasing demand within the next year.
For all you technical traders out there, we are seeing the price action hitting resistance and making a turn lower as of this writing. Initially, the stock saw sideways resistance at $11 but broke out on the upside to nearly $14. However, it is likely that we are seeing the beginning of a correction to test possible support levels as low at $11.
The bottom line here is that it is hard to find companies that have this massive sense of financial security with a cutting edge portfolio of products. There are some risks that we highlighted currently but in a year’s time, they will be in the past.