Littelfuse (LFUS)

Electronic component provider Littelfuse (NASDAQ:LFUS) met Wall Streets revenue expectations in Q3 CY2025, with sales up 10.1% year on year to $624.6 million. On the other hand, next quarter’s revenue guidance of $580 million was less impressive, coming in 1.7% below analysts’ estimates. Its non-GAAP profit of $2.95 per share was 5.5% above analysts’ consensus estimates.

Company Overview

The developer of the first blade-type automotive fuse, Littelfuse (NASDAQ:LFUS) provides electrical protection and control components for the automotive, industrial, electronics, and telecommunications industries.

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 Eaton (NYSE:ETN), ON Semiconductor (NASDAQ:ON), and Bourns (private).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Littelfuse grew its sales at an impressive 10.9% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.

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. Littelfuse’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 2.5% over the last two years. Littelfuse isn’t alone in its struggles as the Electronic Components industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

We can dig further into the company’s revenue dynamics by analyzing its most important segments, Electronics and Automotive, which are 57.2% and 27.4% of revenue. Over the last two years, Littelfuse’s Electronics revenue (fuses and switches) averaged 4.2% year-on-year declines while its Automotive revenue (trucks, commercial machinery, marine) was flat.

This quarter, Littelfuse’s year-on-year revenue growth was 10.1%, and its $624.6 million of revenue was in line with Wall Street’s estimates. Company management is currently guiding for a 9.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 9.4% over the next 12 months, an improvement versus the last two years. This projection is admirable and suggests its newer products and services will spur better top-line performance.

Cost of sales for an industrials business is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics.

Littelfuse’s unit economics are great compared to the broader industrials sector and signal that it enjoys product differentiation through quality or brand. As you can see below, it averaged an excellent 38% gross margin over the last five years. Said differently, roughly $38.02 was left to spend on selling, marketing, R&D, and general administrative overhead for every $100 in revenue.

In Q3, Littelfuse produced a 38.6% gross profit margin, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Littelfuse has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 15.4%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Littelfuse’s operating margin decreased by 8.9 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Littelfuse generated an operating margin profit margin of 15.6%, 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.

Littelfuse’s EPS grew at a remarkable 13.5% compounded annual growth rate over the last five years, higher than its 10.9% annualized revenue growth. However, we take this with a grain of salt because its operating margin didn’t improve and it didn’t repurchase its shares, meaning the delta came from reduced interest expenses or taxes.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Littelfuse, its two-year annual EPS declines of 12.4% mark a reversal from its (seemingly) healthy five-year trend. We hope Littelfuse can return to earnings growth in the future.

In Q3, Littelfuse reported adjusted EPS of $2.95, up from $2.71 in the same quarter last year. This print beat analysts’ estimates by 5.5%. Over the next 12 months, Wall Street expects Littelfuse’s full-year EPS of $10.03 to grow 20.4%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Littelfuse has shown robust cash profitability, enabling it to comfortably ride out cyclical downturns while investing in plenty of new offerings and returning capital to investors. The company’s free cash flow margin averaged 12.8% over the last five years, quite impressive for an industrials business.

Taking a step back, we can see that Littelfuse’s margin dropped by 2.8 percentage points during that time. Continued declines could signal it is in the middle of an investment cycle.

Littelfuse broke even from a free cash flow perspective in Q3. The company’s cash profitability regressed as it was 11.4 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Littelfuse hasn’t been the highest-quality company lately, it historically found a few growth initiatives that worked. Its five-year average ROIC was 12.1%, higher than most industrials businesses.

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. Over the last few years, Littelfuse’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Littelfuse reported $815 million of cash and $879.2 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 $472.7 million of EBITDA over the last 12 months, we view Littelfuse’s 0.1× net-debt-to-EBITDA ratio as safe. We also see its $9.77 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.

Revenue was just in line. Looking forward, revenue and EPS guidance for next quarter both fell short. Overall, it was a weak quarter. The stock traded down 3% to $254.48 immediately after reporting.

Updated: December 4, 2025 at 10:20 PM EST

When considering an investment in Littelfuse, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

Littelfuse isn’t a terrible business, but it doesn’t pass our quality test. Although its revenue growth was impressive over the last five years, it’s expected to deteriorate over the next 12 months and its diminishing returns show management's prior bets haven't worked out. And while the company’s projected EPS for the next year implies the company’s fundamentals will improve, the downside is its declining operating margin shows the business has become less efficient.

Littelfuse’s P/E ratio based on the next 12 months is 21.3x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $302.50 on the company (compared to the current share price of $258.97).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.