Semiconductor manufacturer Vishay Intertechnology (NYSE:VSH) reported sales in line with analyst expectations in Q3 FY2022 quarter, with revenue up 13.6% year on year to $924.7 million. Vishay Intertechnology made a GAAP profit of $140 million, improving on its profit of $97 million, in the same quarter last year.
Is now the time to buy Vishay Intertechnology? Access our full analysis of the earnings results here, it's free.
Vishay Intertechnology (VSH) Q3 FY2022 Highlights:
- Revenue: $924.7 million vs analyst estimates of $925.1 million (small miss)
- EPS (non-GAAP): $0.93 vs analyst estimates of $0.84 (11% beat)
- Free cash flow of $133.1 million, up from $15.2 million in previous quarter
- Inventory Days Outstanding: 88, down from 97 previous quarter
- Gross Margin (GAAP): 31.3%, up from 27.7% same quarter last year
Named after the founder's ancestral village in present-day Lithuania, Vishay Intertechnology (NYSE:VSH) manufactures simple chips and electronic components that are building blocks of virtually all types of electronic devices.
Demand for analog chips is generally linked to the overall level of economic growth, as analog chips serve as the building blocks of most electronic goods and equipment. Unlike digital chip designers, analog chip makers tend to produce the majority of their own chips, as analog chip production does not require expensive leading edge nodes. Less dependent on major secular growth drivers, analog product cycles are much longer, often 5-7 years.
Sales Growth
Vishay Intertechnology's revenue growth over the last three years has been unremarkable, averaging 8.9% annually. But as you can see below, last year has been stronger for the company, growing from quarterly revenue of $813.6 million to $924.7 million. Semiconductors are a cyclical industry and long-term investors should be prepared for periods of high growth, followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
This was a slower quarter for Vishay Intertechnology, with revenue growth of just 13.6%, which missed analyst estimates only slightly by 0.03%. This marks 9 straight quarters of revenue growth, which means the current upcycle has had a good run, as a typical upcycle tends to be 8-10 quarters.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) are an important metric for chipmakers, as it reflects the capital intensity of the business and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise the company may have to downsize production.
This quarter, Vishay Intertechnology’s inventory days came in at 88, 5 days above the five year average, suggesting that despite the recent decrease the inventory levels are still higher than what we used to see in the past.
Key Takeaways from Vishay Intertechnology's Q3 Results
With a market capitalization of $3.05 billion Vishay Intertechnology is among smaller companies, but its more than $917.6 million in cash and positive free cash flow over the last twelve months give us confidence that Vishay Intertechnology has the resources it needs to pursue a high growth business strategy.
We were very impressed by the strong improvements in Vishay Intertechnology’s gross margin this quarter. And we were also excited to see that earnings outperformed Wall St’s expectations. On the other hand, revenue growth is overall a bit slower these days. Zooming out, we think this was a good quarter. But investors might have been expecting more and the company is down 1.73% on the results and currently trades at $21.01 per share.
Vishay Intertechnology may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.
The author has no position in any of the stocks mentioned.