VSH Analysis Q1 2013

VSH Video Analysis

Watch this video analysis of Vishay International (NASDAQ:VSH) to learn if VSH is a stock idea worth learning about further…

VSH Fundamental Analysis – Market Outlook

The global semiconductor industry had a tough time in 2012. Demand in Asia was particularly week early in the second half of 2012, as distributors stopped buying in anticipation of slowing consumer demand. And while North American markets remained relatively robust, demand out of Europe slowed in the latter half of the year too.

So What Does That Mean For Investors Interested in VSH Today?

Time will tell. For now, VSH management seems to have weathered this storm with disciplined operations. Cost reduction measures are in full effect, accounting for tens of millions in savings. Coupled with their growth plan (more on that below), this could just be enough. Now if you’re interested in drilling down a little further…

Here’s an Analysis of How VSH is Performing Across Business Units:

VSH enjoys a very strong position in the industrial and automotive markets. But as expected industrial demand slowed last quarter in Europe. Some are expecting an uptick in 2013, but it’s tough to be certain. On the other hand, one tailwind is the improved penetration in the medical sector.

Capacitors are another business unit with a strong position in Europe and North America (though sensitive to economic sensitivities in the latter area). To see margins increase we will need to see an uptick in volume. Management is confident that green energy applications can drive growth for the capacitor portfolio.

Vishay’s Opto business consists of infrared sensors, couplers and LEDs, mainly for automotive applications and accounted for $50M, down 2% from the last year.

Vishay is also the largest worldwide supplier of diodes, though they are the particular stand out in power applications. But results last quarter were down 18% compared to the year prior, perhaps further proof VSH will struggle to grow on any ongoing European weakness. It seems most areas of their business are exposed here. But I guess in that case, they’re not the only company.

Last but not least…

Vishay is a leader in the low-voltage MOSFET business. But in the last quarter, demand slowed due to the Asia-centric nature of this business. Pains were exacerbated by price deterioration as well. On the high-voltage end of the market, there is anecdotal evidence the products are being well received at market, but

So where does VSH go from here?

While VSH has a number of leading business units, any chance of serious appreciation in their stock price will require solid execution of their growth plan. They are investing more in R&D, key product line manufacturing and aggressively expanding their sales force in Asia, with a serious focus on the Chinese market. So far it looks good but you’ll have to stay tuned for Q1 2013 earnings, April 30, 2013.

So now that you have an idea of the global semiconductor market, and where Vishay Intertechnology fits in, let’s turn to the financial statements…

VSH Fundamental Analysis – Valuation Metrics

As I said in the VSH video analysis above, VSH has a pretty robust balance sheet. It’s not likely they’re going bankrupt anytime soon. So I guess that’s a good starting point.

The book value per share is $11.33, which is just about a dollar below the current stock price ($12.27 as of writing). They also have $4.18 net per share in cash, which is a healthy cushion. Accordingly, debt is quite manageable, with a debt/equity ratio of 0.22.

Bottom Line: VSH Generates a reliable amount of free cash and they are on sound financial footing.

In terms of earnings, recent annualized EPS come in at 0.79, putting the PE at 15.5 – that’s a little high for my tastes, though not outrageous. With a Graham number of $14.36, you’ll see there are still a few dollars of upside here. That said, because the stock is trading above book value and because we have yet to see the growth plan materialize, I would be inclined to wait for lower prices before buying.

But what’s the risk-reward from a trading perspective?

VSH Technical Analysis

In the VSH video technical analysis above, you can see VSH analyzed on multiple time frames. And when you zoom into the 1 year daily chart, you can see that VSH put in a multi-month base from June to November of last year. Since then, the stock has gone on quite the run, before topping out just shy of $14.

VSH Analysis Q1 2013

VSH 1 year chart, daily (click to enlarge)

In the last month, we’ve seen VSH stock make a series of lower highs. Now so far, it has held it’s primary breakout area at 11.66, but this looks like it good fall off at any second. Play safe, children.

And by the way…

If you’re into Fibonacci numbers, you’ll notice that the 50% retracement on the recent rally is about $11.15, and the next stop is $10.65. Given the strong base and the rising 100 and 200 day moving averages below, I would expect this latter level to hold and might even consider initiating a position in VSH.

VSH Analysis – Final Conclusions

As I said in the video analysis of VSH above… WAIT!

The immediate technicals of the chart don’t look great. And given any broader market weakness this stock could quickly roll over. So…

Be Patient. Put this on your radar as an idea to check back with in a month. It could make a great investment if you can buy below book value. It’s just not quite there yet. But let me ask you…

What’s your VSH Analysis?

Leave a Reply