Vishay Intertechnology Inc: Semiconductor Play Could be Ready to Take Off

Vishay Intertechnology Inc: Semiconductor Play Could be Ready to Take OffVSH Stock: Battered Semiconductor Play Worth a Look

At the rate the Nasdaq has been ratcheting higher, you would think that all technology stocks were joining in the momentum. But that’s not the case. Numerous semiconductor stocks have missed the rally, including mid-cap Vishay Intertechnology Inc (NYSE:VSH).

Vishay, while up 44% from its March low, finds itself down 24% this year.

If you are looking for an above-average-risk/reward contrarian opportunity, Vishay may be what you are searching for.

VSH designs discrete semiconductors used for a variety of electronic devices found in the industrial, computing, automotive, consumer, telecommunications, power supplies, military, aerospace, and medical sectors.

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Shares of Vishay are trading in a sideways channel between $14.00 and $18.00. VSH failed to hold its 200-day moving average, and is currently hovering at its 50-day moving average. Further failure to hold could see Vishay stock retest channel support at $14.00. On the upside, $18.00 is the key resistance before taking a run at $19.00-$21.00.

Chart courtesy of StockCharts.com

Vishay Intertechnology Inc Is a Profitable Cash Flow Machine

Revenues increased from 2016 to 2018, prior to declining in 2019, in part to the uncertainties and disruption from the trade war with China.

Fiscal Year Revenue (Billions) Growth
2015 $2.3
2016 $2.3 1.0%
2017 $2.6 11.9%
2018 $3.0 16.8%
2019 $2.7 -12.1%

(Source: “Vishay Intertechnology, Inc.,” MarketWatch, last accessed August 27, 2020.)

But while the trade uncertainties remain for VSH stock, there are some encouraging signs ahead.

Vishay could see its revenues fall to $2.4 billion this year, but there is optimism. Revenues are set to rise 8.3% to $2.6 billion in 2021. (Source: “Vishay Intertechnology, Inc. (VSH),” Yahoo! Finance, last accessed August 27, 2020.)

Vishay has also steadily delivered positive earnings before interest, taxes, depreciation, and amortization (EBITDA).

Fiscal Year EBITDA (Millions) Growth
2015 $356.8
2016 $277.8 -22.1%
2017 $498.2 79.3%
2018 $644.8 29.4%
2019 $450.9 -30.1%

(Source: MarketWatch, op. cit.)

As far as the bottom line goes, Vishay reported profits based on generally accepted accounting principles (GAAP) in three of the last four years. The revenue decline in 2019 impacted earnings, but the number was still the second-best over the past five years.

Fiscal Year GAAP Diluted Earnings Per Share Growth
2015 -$0.73
2016 $0.32 143.8%
2017 -$0.14 -143.7%
2018 $2.24 1,700.7%
2019 $1.13 -49.5%

(Source: MarketWatch, op. cit.)

On an adjusted basis, VSH earned a higher $1.26 per diluted share in 2019. This is expected to contract to $0.79 this year, prior to rising to $1.10. (Source: Yahoo! Finance, op. cit.)

Vishay Intertechnology Inc’s free cash flow grew in three of the last four years, with a strong rebound in 2019.

Fiscal Year Free Cash Flow (Millions) Growth
2015 $94.5
2016 $161.3 70.7%
2017 $198.3 22.9%
2018 $28.6 -85.6%
2019 $139.8 388.7%

(Source: MarketWatch, op. cit.)

A look at the balance sheet shows strong working capital, debt of $545.7 million, and cash of $757.18 million. (Source: Yahoo! Finance, op. cit.)

The strong financial condition is critical for VSH stock to ride out the negative impact of the pandemic.

Analyst Take

Institutional support for Vishay Intertechnology Inc is extremely strong, with 341 institutions holding VSH stock. Insiders have also been actively buying shares. During the last six months, insiders added 50,575 VSH shares. (Source: Yahoo! Finance, op. cit.)

As far as valuation goes, Vishay stock trades at a reasonable 21.8 times the 2021 EPS estimate, one times sales, and an attractive 1.6 times book value.