This semiconductor company is turning around, with three analysts raising their earnings forecasts for this year and four for next year.
Vishay Intertechnology Inc (VSH)
From Argus Weekly Staff Report
BUY-rated Vishay Intertechnology Inc. (VSH) bounced back from negative 1Q16 EPS comps with 16% growth in 2Q16 non-GAAP EPS. Second-quarter revenue of $590 million topped Street expectations in the $586 million range. While revenue was flat year-over-year, it broke a multi-quarter negative streak.
Vishay guided for sequentially stable revenue and gross margin for 3Q16. While that would normally be disappointing for a semiconductor company (3Q is the ‘build’ quarter for semiconductor companies who support OEMs assembling products for the holiday quarter), we believe Vishay’s reduced presence among legacy technology companies partly explains the stable outlook. Meanwhile, the skew in business mix toward industrial and automotive customers is bolstering margins and driving future EPS growth. Wider margins will drive double-digit EPS growth
Vishay’s multi-year efforts to strengthen operations and improve its manufacturing footprint have resulted in a higher-quality product mix and better cash flow. We are reiterating our BUY rating on VSH to a 12-month target price of $16.
VSH shares are trading at 15.6-times our 2016 non-GAAP EPS estimate and at 13.7-times our 2017 forecast. The 2011-2015 average P/E is 14.6. Forward P/Es are on average in line with the median P/E, while other measures of comparable valuation analysis support a value in the low- to mid-teens.
Our more forward-looking discounted free cash flow model signals a value in the low-$20s. The fair value indicated by our blended model of $21 is in a slightly rising trend, and well above current prices.
Jim Kelleher, CFA, Argus Weekly Staff Report, www.argusresearch.com, 212-425- 7500, August 12, 2016