Bel Fuse (BELFA)

Electronic system and device provider Bel Fuse (NASDAQ:BELFA) announced better-than-expected revenue in Q1 CY2025, with sales up 18.9% year on year to $152.2 million. Its GAAP profit of $1.36 per share was 64.8% above analysts’ consensus estimates.

Company Overview

Founded by 26-year-old Elliot Bernstein during the electronics boom after WW2, Bel Fuse (NASDAQ:BELF.A) provides electronic systems and devices to the telecommunications, networking, transportation, and industrial sectors.

Like many equipment and component manufacturers, electronic components companies are buoyed by secular trends such as connectivity and industrial automation. More specific pockets of strong demand include data centers and telecommunications, which can benefit companies whose optical and transceiver offerings fit those markets. But like the broader industrials sector, these companies are also at the whim of economic cycles. Consumer spending, for example, can greatly impact these companies’ volumes.

Competitors offering similar products include TE Connectivity (NYSE:TEL), Amphenol (NYSE:APH), and Vishay (NYSE:VSH).

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Bel Fuse’s sales grew at a sluggish 3.5% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Bel Fuse’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 10% annually.

This quarter, Bel Fuse reported year-on-year revenue growth of 18.9%, and its $152.2 million of revenue exceeded Wall Street’s estimates by 1.6%.

Looking ahead, sell-side analysts expect revenue to grow 17.2% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and indicates its newer products and services will spur better top-line performance.

Bel Fuse’s unit economics are better than the typical industrials business, signaling its products are somewhat differentiated through quality or brand. As you can see below, it averaged a decent 30.7% gross margin over the last five years. Said differently, Bel Fuse paid its suppliers $69.32 for every $100 in revenue.

Bel Fuse’s gross profit margin came in at 38.6% this quarter, up 1.1 percentage points year on year. Bel Fuse’s full-year margin has also been trending up over the past 12 months, increasing by 2.8 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Bel Fuse has managed its cost base well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 10.6%.

Looking at the trend in its profitability, Bel Fuse’s operating margin rose by 12.3 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Bel Fuse generated an operating profit margin of 14.5%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Bel Fuse’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Sadly for Bel Fuse, its EPS declined by more than its revenue over the last two years, dropping 16.9%. This tells us the company struggled to adjust to shrinking demand.

In Q1, Bel Fuse reported EPS at $1.36, up from $1.19 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Bel Fuse has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 7.7% over the last five years, slightly better than the broader industrials sector.

Taking a step back, we can see that Bel Fuse’s margin expanded by 3.7 percentage points during that time. This is encouraging because it gives the company more optionality.

Bel Fuse’s free cash flow clocked in at $5.36 million in Q1, equivalent to a 3.5% margin. This result was good as its margin was 1 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Bel Fuse hasn’t been the highest-quality company lately because of its poor top-line performance, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 16.6%, impressive for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, Bel Fuse’s ROIC has increased significantly over the last few years. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

Bel Fuse reported $66.88 million of cash and $305.9 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $109.2 million of EBITDA over the last 12 months, we view Bel Fuse’s 2.2× net-debt-to-EBITDA ratio as safe. We also see its $3.88 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Bel Fuse blew past analysts’ EPS expectations this quarter. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this quarter featured some important positives. The stock remained flat at $65.32 immediately following the results.

Updated: June 14, 2025 at 11:10 PM EDT

Are you wondering whether to buy Bel Fuse or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Bel Fuse has a few positive attributes, but it doesn’t top our wishlist. Although its revenue growth was weak over the last five years, its growth over the next 12 months is expected to be higher. Plus, Bel Fuse’s expanding operating margin shows the business has become more efficient.

Bel Fuse’s EV-to-EBITDA ratio based on the next 12 months is 8.3x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $93 on the company (compared to the current share price of $78.27).