Is the semiconductor cycle entering its slowdown phase after huge growth in the last 12 months? Vishay Intertechnology Inc. (VSH) isn’t showing any signs of slowing as it recently surprised for the fourth quarter in a row as volumes returned to pre-crisis levels.
But analysts are concerned that the recent run for the semiconductor companies is going to peter out now that inventories have been restocked.
Vishay has its hands in most of the semiconductor markets as it manufactures discrete semiconductors including diodes, MOSFETs and infrared optoelectronics as well as passive electronic components which are used in all types of electronic devices including in autos, computing, aerospace, and telecommunications.
Best Performance in 10 Years
On Nov 2, Vishay reported its third quarter results and saw revenue climb 32% to $694.4 million from $525.3 million in the year ago quarter. It continued the strong year over year growth.
Volume was back to pre-crisis level while pricing remained favorable and its fixed costs remained low. This was a powerful combination which boosted the quarter to the best in 10 years.
Earnings per share were 47 cents, or 46 cents better than a year ago when the company made just 1 cent. This was also better than the Zacks Consensus which called for just 41 cents.
Outlook for the Fourth Quarter
Vishay isn’t seeing much of a slowdown even as analysts believe there will soon be one. Its end markets continue to be strong, especially automotive, industrial and fixed telecom. Its OEM customers are optimistic.
It isn’t glossing over some areas that have seen slowing, including computing and the consumer, however.
But with a strong backlog, Vishay anticipates revenue between $650 and $690 million with performance similar to the strong third quarter.
Zacks Consensus Estimates Rise
Given yet another quarterly beat, its not surprising that analysts have raised estimates for 2010. The Zacks Consensus is up 12 cents to $1.53 in the last 30 days.
That is astounding earnings growth of 7,540% as the company earned just 2 cents in all of 2009.
But analysts are conservative with their growth projections for 2011. While the 2011 Zacks Consensus has risen by 15 cents to $1.64 in the last month, this is earnings growth of just 7.6%.
Cash Rich
If you’re looking for cash, Vishay is rolling in it with cash on hand as of Oct 2 of $745.3 million, up from $579.2 million at the end of 2009.
The company expects 2010 to be its highest generation of free cash since 2002. You can see the cash rebound in the 10 year cash on hand chart below.
Vishay is Cheap
You don’t have to pay much for Vishay’s earnings.
This Zacks #1 Rank (strong buy) is trading at just 8.9x forward estimates while peers trade at 14.8.
The company has a price-to-book ratio of just 1.6 and a price-to-sales ratio of about 1. Both of those ratios are well-within the value parameters.
The company also has a solid 1-year return on equity (ROE) of 15.8%, well above its peers at 9.8%.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.
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