BUSINESS
Rogers Corporation designs, develops, manufactures, and sells engineered materials and components worldwide. It operates through Advanced Electronics Solutions (AES), Elastomeric Material Solutions (EMS), and Other segments. The AES segment offers circuit materials, ceramic substrate materials, busbars, and cooling solutions for applications in electric and hybrid electric vehicles (EV/HEV), wireless infrastructure, automotive, telematics and thermal solutions, aerospace and defense, mass transit, clean energy, connected devices, and wired infrastructure markets. This segment sells its products under the curamik, ROLINX, RO4000, RO3000, RT/duroid, CLTE Series, TMM, AD Series, DiClad, CuClad Series, Kappa, COOLSPAN, TC Series, 92ML, IsoClad, MAGTREX, XTremeSpeed RO1200, IM Series, 2929 Bondply, 3001 Bondply Film, and SpeedWave names.
INVESTMENT RATING
With future capital returns forecasted to exceed the cost of capital, ROG is expected to continue to be a modest Value Builder.
Rogers has a current Value Trend Rating of D (Negative).
With this rating, PTR’s two proprietary measures of a stock’s current attractiveness are providing consistent signals. Rogers has a neutral Appreciation Score of 42 and a slightly negative Power Rating of 34, producing the Negative Value Trend Rating.
Rogers’ stock is selling below targeted value. The current stock price of $116.23 compares to targeted value 12 months forward of $140.
This neutral appreciation potential results in an appreciation score of 42 (58% of the universe has greater appreciation potential.)
Rogers has a Power Rating of 34. (This slightly negative Power Rating indicates that Rogers’ chances of enjoying attractive investment performance over the near to intermediate term are only average.)
Factors contributing to this slightly negative Power Rating include: recent price action has been unfavorable; and earnings estimate behavior for Rogers has been slightly negative recently. An offsetting factor is the Printed Circuit Boards comparison group is in a strong phase currently.
INVESTMENT PROFILE
Rogers’ financial strength is high. Financial strength rating is 72.
Relative to the S&P 500 Composite, Rogers Corp. has moderate Value characteristics; its appeal is likely to be to Capital Gain-oriented investors; the perception is that ROG is normal risk. Relative weaknesses include: low forecasted profitability, low historical profitability, low historical growth, and high earnings variability. Rogers’ valuation is moderate: low dividend yield, moderate P/E ratio, and low price/book ratio. ROG has unusually low market capitalization.
CURRENT SIGNALS
Rogers’ current operations are eroding. Return on equity is falling, reflecting: and falling tax keep rate.
Rogers’ current technical position is very weak. The stock price is in a 6.1 month down move. The stock has declined 24.4% from its prior high. The stock price is below its 200 day moving average which is in a downtrend.
ALERTS
Recent small positive changes in fundamentals have benefitted Rogers Corp. (NYSE: ROG): significant quarterly earnings acceleration occurred.
In light of this new information we are reviewing our current Overall Rating of D. This review will be completed in the next several days.
For its fourth fiscal quarter (ending December 31), Rogers Corp. (NYSE: ROG) has reported E.P.S. of $1.25 compared to $3.59 a year ago. E.P.S. were $3.04 for the latest four quarters through December 31 versus $6.21 for the same period a year ago.
On 2/21/24, Rogers Corp. (NYSE: ROG) stock declined by -2.5%, closing at $116.23. Moreover, trading volume in this decline was unusually high at 185% of normal. The stock has been weak relative to the market over the last nine months and has declined -4.4% during the last week.
CASH FLOW
In 2022, Rogers experienced no change in cash of +$3.6 million (+2%). Sources of cash balanced uses. Cash generated from 2022 EBITDA totaled +$135.2 million. Non-operating sources contributed +$61.3 million (+45% of EBITDA). Cash taxes consumed -$29.6 million (-22% of EBITDA). Re-investment in the business amounted to -$112.1 million (-83% of EBITDA). On a net basis, debt investors contributed +$11.9 million (+9% of EBITDA) while equity investors removed -$63.1 million (-47% of EBITDA).
Rogers’ Non-operating Income, %EBITDA has enjoyed a volatile overall uptrend over the period. This improvement was accompanied by stability for the Rogers Peer Group. (Since 2019 Non-operating Income, %EBITDA has accelerated very sharply.) In most years, Rogers was in the third quartile and top quartile. Currently, Rogers is upper quartile at +45% of EBITDA (+$61.3 million).
Rogers’ Cash Taxes, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Rogers Peer Group. In most years, Rogers was in the second quartile and top quartile. Currently, Rogers is below median at -22% of EBITDA (-$29.6 million).
Rogers’ Business Re-investment, %EBITDA has suffered a volatile overall downtrend over the period. This downtrend was accompanied by an opposite trend for the Rogers Peer Group. In most years, Rogers was in the lower quartile and third quartile. Currently, Rogers is lower quartile at -83% of EBITDA (-$112.1 million).
Rogers’ Debt Investors, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by stability for the Rogers Peer Group. In most years, Rogers was in the top quartile and lower quartile. Currently, Rogers is upper quartile at +9% of EBITDA (+$11.9 million).
Rogers’ Equity Investors, %EBITDA has suffered a volatile overall downtrend over the period. This downtrend was accompanied by stability for the Rogers Peer Group. (Since 2020 Equity Investors, %EBITDA has accelerated very sharply.) In most years, Rogers was in the top quartile and third quartile. Currently, Rogers is lower quartile at -47% of EBITDA (-$63.1 million).
Rogers’ Change in Cash, %EBITDA has experienced a volatile overall downtrend over the period. This downtrend was accompanied by an opposite trend for the Rogers Peer Group. In most years, Rogers was in the top quartile and third quartile. Currently, Rogers is above median at +3% of EBITDA (+$3.6 million).
Rogers’ Cash, %Revenue has experienced a minor downtrend over the period. This downtrend was accompanied by stability for the Rogers Peer Group. (Since 2019 Cash, %Revenue has experienced a minor recovery.) In most years, Rogers was in the top quartile. Currently, Rogers is upper quartile at +24%.
PROFITABILITY
Rogers’ return on equity has been stable since 2013. The current level of 8.3% is 1.23X the low for the period and is -20.7% from the high.
This stability was due to little change in pretax operating return and little change in non-operating factors.
The productivity of Rogers’ assets declined over the full period 2013-2023: asset turnover has experienced a minor downtrend.
More than offsetting this trend, however, pretax margin has exhibited a volatile overall uptrend that accelerated very sharply from the 2019 level.
Non-operating factors (income taxes and financial leverage) had little influence on return on equity.
Rogers’ return on equity is at the lower quartile (8.3%) for the four quarters ended September, 2023.
Operating performance (pretax return on assets) is below median (8.3%) reflecting asset turnover that is at the lower quartile (0.61X) and pretax margin at the lower quartile (13.6%).
Tax “keep” rate (income tax management) is at the upper quartile (79.9%) resulting in after tax return on assets that is at the lower quartile.
Financial leverage (leverage) is lower quartile (1.26X).
GROWTH RATES
Overall, Rogers’ growth rate has slowed considerably in recent years.
Rogers’ historical income statement growth has been in line with balance sheet growth. Revenue growth has paralleled asset growth; earnings growth has paralleled equity growth.
Annual revenue growth has been 5.3% per year. (More recently it has been 1.6%.)
Total asset growth has been 7.1% per year.
Annual E.P.S. growth has been 7.7% per year.
Equity growth has been 8.8% per year.
Rogers’ consensus growth rate forecast (average of Wall Street analysts) is 20.0% — substantially above the average of the historical growth measures.
Relative to the Rogers Peer Group, Rogers’ historical growth measures are generally third quartile. Equity growth (8.8%) has been at median. Total asset growth (7.1%) has been below median. Revenue growth (5.3%) has been substantially below median. E.P.S. growth (7.7%) has been at the lower quartile.
In contrast, consensus growth forecast (20.0%) is upper quartile.
PRICE HISTORY
Over the full time period, Rogers’ stock price performance has been volatile and slightly below market. Between April, 2013 and February, 2024, Rogers’ stock price rose +173%; relative to the market, this was a -13% loss. Significant price moves during the period: 1) December, 2021 – November, 2022: -60%; 2) September, 2020 – December, 2021: +178%; and 3) October, 2016 – January, 2018: +203%.
TOTAL INVESTMENT RETURNS
Current annual total return performance of -17.4% is lower quartile relative to the S&P 500 Composite.
In addition to being lower quartile relative to S&P 500 Composite, current annual total return performance through January, 2024 of -17.4% is lower quartile relative to Rogers Corp. Peer Group.
Current 5-year total return performance of -1.9% is lower quartile relative to the S&P 500 Composite.
Through January, 2024, with lower quartile current 5-year total return of -1.9% relative to S&P 500 Composite, Rogers’ total return performance is lower quartile relative to Rogers Corp. Peer Group.
VALUATION BENCHMARKS
Relative to S&P 500 Composite, ROG’s overall valuation is normal. The highest factor, the ratio of enterprise value/earnings before interest and taxes, is upper quartile. Ratio of enterprise value/assets is slightly below median. Price/earnings ratio is slightly below median. Ratio of enterprise value/revenue is below median. The lowest factor, the price/equity ratio, is lower quartile.
Relative to Rogers Peer Group, ROG’s overall valuation is normal. The highest factor, the ratio of enterprise value/earnings before interest and taxes, is upper quartile. Price/earnings ratio is below median. Ratio of enterprise value/revenue is below median. Ratio of enterprise value/assets is below median. The lowest factor, the price/equity ratio, is near the lower quartile.
Rogers has a very large value gap compared to the median valuation. For ROG to rise to median valuation, its current ratio of enterprise value/revenue would have to rise from the current level of 2.43X to 3.16X. If ROG’s ratio of enterprise value/revenue were to rise to 3.16X, its stock price would be lower by $36 to $153.
For ROG to hit lower quartile valuation relative to the Rogers Peer Group, its current ratio of enterprise value/revenue would have to fall from the current level of 2.43X to 1.40X. If ROG’s ratio of enterprise value/revenue were to fall to 1.40X, its stock price would decline by $-52 from the current level of $116.
VALUE TARGETS
With future capital returns forecasted to exceed the cost of capital, ROG is expected to continue to be a modest Value Builder.
Rogers’ current Price Target of $138 represents a +18% change from the current price of $116.23.
This neutral appreciation potential results in an appreciation score of 42 (58% of the universe has greater appreciation potential.)
Reinforcing this neutral Appreciation Score of 42, the moderately low Power Rating of 34 contributes to an Value Trend Rating of D.
Rogers’ current Price Target is $138 (-3% from the 2022 Target of $142 but +18% from the 02/21/24 price of $116.23). This plateau in the Target is the result of a +5% increase in the equity base and a -8% decrease in the price/equity multiple. The forecasted decline in return on equity has a large negative impact on the price/equity multiple and the forecasted decline in growth has a large negative impact as well. Partially offsetting these Drivers, the forecasted decline in cost of equity has a very large positive impact.
PTR’s return on equity forecast is 7.5% — in line with our recent forecasts. Forecasted return on equity erratic but little changed between 2014 and 2022. The current forecast is well below the 2017 peak of 13%.
PTR’s growth forecast is 7.0% — slightly below our recent forecasts. Forecasted growth exhibited a slight, erratic decline between 2014 and 2022. The current forecast is below the 2014 peak of 11%.
PTR’s cost of equity forecast is 5.3% — in line with recent levels. Forecasted cost of equity suffered a dramatic, erratic increase between 2014 and 2022. The current forecast is below the 2018 peak of 8.7%.
At Rogers’ current price of $116.23, investors are placing a positive value of $13 on its future investments. This view is consistent with the company’s most recent performance that reflected a growth rate of 11.0% per year, and a return on equity of 8.4% versus a cost of equity of 6.1%.
PTR’s 2024 Price Target of $138 is based on these forecasts and reflects an estimated value of existing assets of $119 and a value of future investments of $19.
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