The Fed has raised the interest rate from near zero to almost 5% over the past year in an attempt to cool inflation that was running at historic highs. Considering that the inflation is still high, while the labor market remains resilient, the Fed is expected to lift interest rates higher in the coming months, which could tip the economy into a recession.

As a result, the stock market is volatile. So, I think waiting for a better entry point in electronics stock Vishay Intertechnology, Inc. (VSH - Get Rating) could be wise, and I will explain why.

Shares of VSH have gained 10.6% over the past year, closing the last trading session at $21.23. However, the stock has declined 6.9% over the past month. Also, while it has a 24-month beta of 0.96, its 60-month beta is 1.32.

VSH’s fourth-quarter revenue aligned with analyst estimates. However, it missed the EPS estimates by 8.8%. For the first quarter of 2023, management expects revenues in the range of $825 million and $865 million.

Joel Smejkal, president and CEO, said, “During the fourth quarter, we began to see indications of an inventory correction, which impacted revenues and our gross profit margin. Given that over 60% of our revenue is derived from the automotive and industrial ends markets, which are experiencing strong demand from mega electrification trends, we are anticipating a narrow inventory correction in the first half of the year.”

Here’s what could shape VSH’s performance in the near term:

Solid Financials

VSH’s net revenues rose 1.5% year-over-year to $855.30 million for the fourth quarter that ended December 31, 2022. Its gross profit grew 8.3% year-over-year to $249.12 million). Also, its adjusted net earnings increased 9.9% year-over-year to $98.76 million, while its adjusted EPS came in at $0.69, representing an increase of 11.3% year-over-year.

Mixed Profitability

VSH’s trailing-12-month EBIT margin of 17.49% is 183.3% higher than the industry average of 6.17%. Its trailing-12-month net income margin of 12.26% is 324.6% higher than the industry average of 2.89%.

However, VSH’s trailing-12-month gross profit margin of 30.47% is 38.1% lower than the 49.19% industry average. Its trailing-12-month levered FCF margin of 3.77% is 46.78% higher than the 7.09% industry average.

Poor Analysts Expectations

Street expects VSH’s EPS for the fiscal first quarter ending March 2023 to decrease 21.1% year-over-year to $0.56. Its revenue is expected to decline marginally year-over-year to $845.83 million in the same quarter.

VSH’s EPS is expected to decline 26.8% year-over-year to $2.31 in the fiscal year 2023. Its revenue is expected to decrease 2.9% year-over-year to $3.39 billion in the same year.

Discounted Valuation

In terms of forward non-GAAP P/E, VSH is currently trading at 9.19x, which is 54.4% lower than the 20.16x industry average. Its forward EV/EBITDA multiple of 4.47x is 64.5% lower than the 12.61 industry average.

Also, its forward EV/Sales and Price/Sales multiples of 0.80x and 0.88x are lower than the 2.81x and 2.73x industry averages, respectively.

POWR Ratings Uncertain Prospects

VSH has an overall rating of C, translating to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. VSH has an A grade for Value, consistent with its lower-than-industry valuation multiples.

It has a C grade for Quality, in sync with its mixed profitability margins. Poor analysts’ expectations justify its grade of D for Sentiment.

Among the 44 stocks in the B-rated Technology – Electronics industry, VSH is ranked #19.  

Beyond what is stated above, we have graded VSH for Growth, Stability, Sentiment, and Momentum. Get all VSH ratings here.

Bottom Line

VSH is trading above the 200-day moving average of $20.47 but below its 50-day moving average of $22.01.

Moreover, analysts expect the company’s top line to deteriorate this year. Thus, I think investors should wait for the company’s outlook to improve before investing in the stock.

How Does Vishay Intertechnology, Inc. (VSH) Stack up Against Its Peers?

VSH has an overall POWR Rating of C. One could also check out these other stocks within the Technology – Electronics industry with an A (Strong Buy) and B (Buy) rating: Bel Fuse Inc. – Class B (BELFB - Get Rating), Fuji Electric Co., Ltd. (FELTY - Get Rating), and Encore Wire Corporation (WIRE - Get Rating).

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VSH shares were trading at $21.40 per share on Wednesday morning, up $0.17 (+0.80%). Year-to-date, VSH has declined -0.79%, versus a 3.15% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...

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