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small-cap

Speculative Bet on This NYSE-Listed IT Play - VPG

Oct 28, 2021 | Team Kalkine
Speculative Bet on This NYSE-Listed IT Play - VPG

Vishay Precision Group, Inc.

VPG Details

Vishay Precision Group, Inc. (NYSE: VPG) designs, manufacturers, and markets sensors, specialized resistors, and strain gauges leveraging its patented foil technology. VPG's products include precision foil resistors, foil strain gauges, and other sensors that convert mechanical impulses into electrical signals for display, processing, and control instrumentation and systems.

Latest News:

  • Recent Product Launch: On September 07, 2021, VPG's brand VPG Foil Resistors launched FRFS0402, its smallest ultra-high-precision Bulk Metal Foil technology resistor, which incorporates a standoff construction that gives an advance over ordinary flip-chip technology. FRFS0402 is ideal for use in telecommunication network equipment, medical equipment, high-temperature applications, automated test equipment (ATE), mid-range audio, handheld meters, and other small instrumentation or control equipment. It also has applications in avionics, military, and space (AMS).

 

H1FY21 Results:

  • Double-Digit Growth in Topline: The company reported a 15.05% rise in net revenues to USD 145.93 million during H1FY21 (ended July 03, 2021) from USD 126.84 million during H1FY20 (ended June 27, 2020), attributable to increased volumes under Foil Technology and Force Sensors segments, and the accumulation of revenues from the acquisition of Diversified Technical Systems, Inc. (DTS) in June 2021.
  • Expansion of Net Income: VPG reported an increase in net income to USD 9.01 million during H1FY21 vs. USD 5.04 million during H1FY20.
  • Cash and Debt Position: As of July 03, 2021, it had cash and cash equivalents of USD 73.46 million, with total debt amounting to USD 60.67 million.

Risks:

  • Trade Tariff Risk: VPG carries its production in China, Europe, Canada, Israel, the United States, among other places. As a result, any significant increase in tariffs or other limitations on Chinese, European, Canadian, or Israeli imports to the US could harm the company's operations and finances.
  • Exchange Rate Fluctuation Risk: The majority of VPG's revenue in H1FY21 was generated in currencies other than USD, thus exposing it to exchange rate fluctuations.

Outlook:

  • Revenue Estimate: As of August 10, 2021, VPG expects sequential growth in net revenues to USD 81 – 87 million, based on constant Q2FY21 exchange rates.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

  

(Analysis by Kalkine Group)

  • % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

VPG Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

VPG's share price has decreased 36.15% in the past twelve months and is currently leaning towards the higher end of its 52-week range of USD 23.61 to USD 39.71. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 34.54. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 41.94.

Considering the company's growth prospects, recent product launch, inorganic growth programs, associated risks, and current valuation, we recommend a "Speculative Buy" rating on the stock at the current price of USD 33.82, down 1.34% as of October 27, 2021, 11:13 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.