Vishay Precision Group, Inc.

VPG Details

Vishay Precision Group, Inc. (NYSE: VPG) develops and sells proprietary technology-based sensors and sensor-based measurement systems and speciality resistors and strain gauges. The firm provides precision goods and solutions. Most of the company's products and solutions are based on patented foil technology and are manufactured as part of a vertically integrated structure. It is active in the United States as well as other nations.

Latest News:

• Unveiled Improved Solution: VPG unveiled the ACCUCAMB Camber Gage Model C885, an improved solution for real bar form assessment and strip steering applications, on May 12, 2022. It enables hot strip mill operators to measure bar forms and strip locations during active rolling in two essential process applications.

Q1 FY22 Results:

• Growth in Revenue: VPG’s Revenue climbed by 24.2% year over year to USD 87.7 million, driven by growth in all three business sectors and its markets. With a record backlog of USD 170.6 million, the company reflects favourable market circumstances.

(Source: Company Filings)

• Company’s Profitability vs Margins: The company's gross margins were 40.2% in Q1 FY22 compared to 40.5% in Q1 FY21, with an Adjusted EBITDA of USD 12.6 million compared to USD 9.5 million in Q1 FY21, and a net margin of 7.6% in Q1 FY22, which was higher than the industry median and from Q1 FY21.
• Bottom Line Growth: The Company's net earnings were USD 6.36 million in Q1 FY22 compared to USD 4.96 million in Q1 FY21, resulting in USD 0.46 and USD 0.36 in net earnings per diluted share.
• Key Balance Sheet Items: Some of the key balances representing a strong and sustainable balance sheet are given below.

(Source: Company Filings)

 Q2 FY22 Guidance:

• Revenue Guidance: Net revenues for Q2 FY22 are expected to increase sequentially and range from USD 88 million to USD 96 million.

Key Risks:

• Raw Material, Quality and Cost Risk: Certain materials can only be obtained from a small number of sources. For most raw materials, alternative sources are accessible worldwide, but it would take a long time (up to 12 months) to establish an effective production schedule. This will influence the supply chain as well as current operations.
• Commodity Pricing Risk: Certain metals required to produce our goods are traded on active markets, and their prices can be quite volatile.

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

(Source: 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.

Stock Recommendation:

VPG's stock price has fallen 18.50% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 39.71 to USD 28.32. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 34.44.

Based on top-line growth, optimistic revenue estimates, higher margins, robust net income, associated risks, and current valuation, we recommend a "Hold" rating on the stock at the current market price of USD 30.46 as of May 31, 2022, at 08:30 AM PDT.

1 Year Technical Price Chart (as of May 31, 2022, at 08:30 AM PDT). Source: REFINITIV, Analysis by Kalkine Group

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.