BUSINESS
Vishay Intertechnology, Inc. manufactures and supplies discrete semiconductors and passive electronic components in Asia, Europe, and the Americas. It operates through six segments: Metal Oxide Semiconductor Field Effect Transistors (MOSFETs), Diodes, Optoelectronic Components, Resistors, Inductors, and Capacitors. The MOSFETs segment offers low- and medium-voltage TrenchFET MOSFETs, high-voltage planar MOSFETs, high voltage Super Junction MOSFETs, power integrated circuits, and integrated function power devices. The Diodes segment provides rectifiers, small signal diodes, protection diodes, thyristors/silicon-controlled rectifiers, and power modules.
INVESTMENT RATING
VSH is expected to continue to be a Value Builder reflecting capital returns that are forecasted to be above the cost of capital.
Vishay Intertechnology has a current Value Trend Rating of D (Negative).
The Value Trend Rating reflects very contradictory signals from PTR’s two proprietary measures of a stock’s attractiveness. Vishay Intertechnology has a good Appreciation Score of 72 but a very low Power Rating of 10, and the Negative Value Trend Rating results.
Vishay Intertechnology’s stock is selling well below targeted value. The current stock price of $22.51 compares to targeted value 12 months forward of $41.
Vishay Intertechnology’s high appreciation potential results in an appreciation score of 72 (only 28% of the universe has greater appreciation potential.)
Vishay Intertechnology has a Power Rating of 10. (This very low Power Rating indicates that VSH only has a better chance of achieving attractive investment performance over the near to intermediate term than 10% of companies in the universe.)
Factors contributing to this very low Power Rating include: VSH’s earnings estimates have fallen very significantly in recent months; recent price action has been unfavorable; and the Electronic Computer, Accessories comparison group is currently in an unfavorable position.
INVESTMENT PROFILE
VSH’s financial strength is average. Financial strength rating is 58.
Relative to the S&P 500 Composite, Vishay Intertechnology Inc. has slightly more Value than Growth characteristics; its appeal is likely to be to Income-oriented investors; the perception is that VSH is higher risk. Relative weaknesses include: low forecasted profitability, low historical profitability, low expected growth, and high earnings variability. VSH’s valuation is moderate: moderate dividend yield, moderate P/E ratio, and low price/book ratio. VSH has unusually low market capitalization.
CURRENT SIGNALS
Vishay Intertechnology’s current operations are eroding. Return on equity is falling, reflecting: and falling asset utilization.
Vishay Intertechnology’s current technical position is very weak. The stock price is in a 7.9 month down move. The stock has declined 20.7% from its prior high. The stock price is below its 200 day moving average which is in a downtrend.
ALERTS
Vishay Intertechnology Inc. (NYSE: VSH). Marginal positive changes in fundamentals have recently occurred: significant quarterly earnings acceleration occurred.
The stock is currently rated D.
Vishay Intertechnology Inc. (NYSE: VSH) stock closed at $22.51 on 3/25/24 after a large increase of 2.3%. Moreover, above average trading volume at 123% of normal accompanied the advance. The stock has risen 1.5% during the last week but has been weak relative to the market over the last nine months.
CASH FLOW
In 2023, Vishay Intertechnology generated a significant increase in cash of +$92.4 million (+10%). Sources of cash were larger than uses. Cash generated from 2023 EBITDA totaled +$670.5 million. Non-operating sources contributed +$4.7 million (+1% of EBITDA). Cash taxes consumed -$163.3 million (-24% of EBITDA). Re-investment in the business amounted to -$533.1 million (-80% of EBITDA). On a net basis, debt investors furnished +$287.6 million (+43% of EBITDA) while equity investors pulled out -$174.0 million (-26% of EBITDA).
VSH’s Non-operating Income, %EBITDA has exhibited a minor overall uptrend over the period. This improvement was accompanied by a similar trend for the Vishay Intertechnology Peer Group. In most years, Vishay Intertechnology was in the third quartile and top quartile. Currently, Vishay Intertechnology is at the upper quartile at +1% of EBITDA (+$4.7 million).
VSH’s Cash Taxes, %EBITDA has exhibited little to no overall change over the period. This stability was accompanied by an uptrend for the Vishay Intertechnology Peer Group. (Since 2021 Cash Taxes, %EBITDA has experienced a very sharp decline.) In most years, Vishay Intertechnology was in the lower quartile and top quartile. Currently, Vishay Intertechnology is lower quartile at -24% of EBITDA (-$163.3 million).
VSH’s Business Re-investment, %EBITDA has suffered a very strong overall downtrend over the period. This downtrend was accompanied by a similar trend for the Vishay Intertechnology Peer Group. (Since 2020 Business Re-investment, %EBITDA has accelerated sharply.) In most years, Vishay Intertechnology was in the second quartile and top quartile. Currently, Vishay Intertechnology is substantially below median at -80% of EBITDA (-$533.1 million).
VSH’s Debt Investors, %EBITDA has experienced a volatile overall uptrend over the period. This improvement was accompanied by stability for the Vishay Intertechnology Peer Group. In most years, Vishay Intertechnology was in the second quartile and third quartile. Currently, Vishay Intertechnology is upper quartile at +43% of EBITDA (+$287.6 million).
VSH’s Equity Investors, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Vishay Intertechnology Peer Group. In most years, Vishay Intertechnology was in the second quartile and lower quartile. Currently, Vishay Intertechnology is lower quartile at -26% of EBITDA (-$174.0 million).
VSH’s Change in Cash, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Vishay Intertechnology Peer Group. In most years, Vishay Intertechnology was in the second quartile and top quartile. Currently, Vishay Intertechnology is upper quartile at +14% of EBITDA (+$92.4 million).
VSH’s Cash, %Revenue has suffered a strong overall downtrend over the period. This downtrend was accompanied by a similar trend for the Vishay Intertechnology Peer Group. In most years, Vishay Intertechnology was in the top quartile and second quartile. Currently, Vishay Intertechnology is at the upper quartile at +30%.
PROFITABILITY
VSH’s return on equity has improved very significantly since 2014. The current level of 14.7% is 2.29X the low for the period and is -41.0% from the high.
VSH’s very strong positive trend in pretax operating return significantly augmented by a very strong positive trend in non-operating factors is a significant analytical factor.
The productivity of VSH’s assets rose over the full period 2014-2023: asset turnover has exhibited a volatile overall uptrend.
Reinforcing this trend, pretax margin enjoyed a very strong overall uptrend although it experienced a very sharp decline after the 2022 high.
Non-operating factors (income taxes and financial leverage) had a very significant positive influence on return on equity.
VSH’s return on equity is at the upper quartile (14.7%) for the four quarters ended December, 2023.
Operating performance (pretax return on assets) is at the upper quartile (11.0%) reflecting asset turnover that is at median (0.80X) and pretax margin at the upper quartile (13.7%).
Tax “keep” rate (income tax management) is lower quartile (69.3%) resulting in after tax return on assets that is above median.
Financial leverage (leverage) is at median (1.93X).
GROWTH RATES
There are no significant differences between Vishay Intertechnology’s longer term growth and growth in recent years.
Vishay Intertechnology’s historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has exceeded equity growth.
Annual revenue growth has been 4.7% per year.
Total asset growth has been 3.4% per year.
Annual E.P.S. growth has been 13.8% per year.
Equity growth has been 3.2% per year. (More recently it has been 9.5%.)
Vishay Intertechnology’s consensus growth rate forecast (average of Wall Street analysts) is -8.8% — substantially below the average of the historical growth measures.
Relative to the Vishay Intertechnology Peer Group, Vishay Intertechnology’s historical growth measures are erratic. Revenue growth (4.7%) has been at median. E.P.S. growth (13.8%) has been slightly below median. Total asset growth (3.4%) has been at the lower quartile. Equity growth (3.2%) has been lower quartile.
Consensus growth forecast (-8.8%) is lower quartile.
PRICE HISTORY
Over the full time period, Vishay Intertechnology’s stock price performance has been variable and significantly below market. Between May, 2013 and March, 2024, Vishay Intertechnology’s stock price rose +55%; relative to the market, this was a -52% loss. Significant price move during the period: 1) September, 2015 – October, 2017: +130%.
TOTAL INVESTMENT RETURNS
Current annual total return performance of 4.1% is below median relative to the S&P 500 Composite.
In addition to being below median relative to S&P 500 Composite, current annual total return performance through February, 2024 of 4.1% is slightly above median relative to Vishay Intertechnology Inc. Peer Group.
Current 5-year total return performance of 1.8% is lower quartile relative to the S&P 500 Composite.
Through February, 2024, with lower quartile current 5-year total return of 1.8% relative to S&P 500 Composite, Vishay Intertechnology’s total return performance is lower quartile relative to Vishay Intertechnology Inc. Peer Group.
VALUATION BENCHMARKS
Relative to S&P 500 Composite, VSH’s overall valuation is exceptionally low. All five factors are lower quartile. The highest factor is the ratio of enterprise value/assets, followed by the price/equity ratio, then by the ratio of enterprise value/earnings before interest and taxes, then by the price/earnings ratio. The lowest factor is the ratio of enterprise value/revenue.
Relative to Vishay Intertechnology Peer Group, VSH’s overall valuation is exceptionally low. All five factors are lower quartile. The highest factor is the ratio of enterprise value/assets, followed by the price/equity ratio, then by the ratio of enterprise value/revenue, then by the ratio of enterprise value/earnings before interest and taxes. The lowest factor is the price/earnings ratio.
Vishay Intertechnology has a major value gap compared to the median. For VSH to hit median valuation, its current ratio of enterprise value/revenue would have to rise from the current level of 1.11X to 1.94X. If VSH’s ratio of enterprise value/revenue were to rise to 1.94X, its stock price would be higher by $23 to $45.
For VSH to achieve upper quartile valuation relative to the Vishay Intertechnology Peer Group, its current ratio of enterprise value/revenue would have to rise from the current level of 1.11X to 2.71X. If VSH’s ratio of enterprise value/revenue were to rise to 2.71X, its stock price would increase by $44 from the current level of $23.
VALUE TARGETS
VSH is expected to continue to be a Value Builder reflecting capital returns that are forecasted to be above the cost of capital.
Vishay Intertechnology’s current Price Target of $46 represents a +106% change from the current price of $22.51.
This high appreciation potential results in an appreciation score of 72 (only 28% of the universe has greater appreciation potential.)
Notwithstanding this high Appreciation Score of 72, the low Power Rating of 10 results in an Value Trend Rating of D.
Vishay Intertechnology’s current Price Target is $46 (-3% from the 2023 Target of $48 but +106% from the 03/25/24 price of $22.51). This plateau in the Target is the result of a +10% increase in the equity base and a -12% decrease in the price/equity multiple. The forecasted decline in return on equity has a very large negative impact on the price/equity multiple and the forecasted decline in growth has a slight 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 11.0% — slightly below our recent forecasts. Forecasted return on equity enjoyed a dramatic, erratic increase between 2015 and 2023. The current forecast is well below the 2022 peak of 19%.
PTR’s growth forecast is 9.0% — above our recent forecasts. Forecasted growth enjoyed a dramatic, erratic increase between 2015 and 2023. The current forecast is well above the 2020 low of 0%.
PTR’s cost of equity forecast is 7.0% — slightly below recent levels. Forecasted cost of equity suffered a dramatic, erratic increase between 2015 and 2023. The current forecast is below the 2022 peak of 11.5%.
At Vishay Intertechnology’s current price of $22.51, investors are placing a positive value of $1 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 14.8% versus a cost of equity of 9.2%.
PTR’s 2025 Price Target of $46 is based on these forecasts and reflects an estimated value of existing assets of $25 and a value of future investments of $21.
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