Vishay Precision (VPG)

Precision measurement and sensing technologies provider Vishay Precision (NYSE:VPG) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 11.2% year on year to $71.74 million. Next quarter’s revenue guidance of $73 million underwhelmed, coming in 3.6% below analysts’ estimates. Its non-GAAP profit of $0.04 per share was 42.9% below analysts’ consensus estimates.

Company Overview

Emerging from Vishay Intertechnology in 2010, Vishay Precision (NYSE:VPG) operates as a global provider of precision measurement and sensing technologies.

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 of Vishay Precision include Measurement Specialties (NASDAQ:MEAS), Mettler-Toledo International (NYSE:MTD), and Ametek (NYSE:AME).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, Vishay Precision’s 1.6% annualized revenue growth over the last five years was sluggish. This fell short of our benchmarks 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. Vishay Precision’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 9.6% annually. Vishay Precision 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.

This quarter, Vishay Precision missed Wall Street’s estimates and reported a rather uninspiring 11.2% year-on-year revenue decline, generating $71.74 million of revenue. Company management is currently guiding for a 5.6% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 6% over the next 12 months. While this projection suggests its newer products and services will spur better top-line performance, it is still below the sector average.

All else equal, we prefer higher gross margins because they usually indicate that a company sells more differentiated products and commands stronger pricing power.

Vishay Precision’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 41% gross margin over the last five years. That means Vishay Precision only paid its suppliers $59.04 for every $100 in revenue.

This quarter, Vishay Precision’s gross profit margin was 37.7%, marking a 5.7 percentage point decrease from 43.4% in the same quarter last year. Vishay Precision’s full-year margin has also been trending down over the past 12 months, decreasing by 3.3 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Vishay Precision 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%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Vishay Precision’s operating margin decreased by 6.4 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.

In Q1, Vishay Precision’s breakeven margin was down 9.6 percentage points year on year. Since Vishay Precision’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

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.

Sadly for Vishay Precision, its EPS declined by 16.2% annually over the last five years while its revenue grew by 1.6%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

We can take a deeper look into Vishay Precision’s earnings to better understand the drivers of its performance. As we mentioned earlier, Vishay Precision’s operating margin declined by 6.4 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

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 Vishay Precision, its two-year annual EPS declines of 53.6% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q1, Vishay Precision reported EPS at $0.04, down from $0.42 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Vishay Precision’s full-year EPS of $0.57 to grow 112%.

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.

Vishay Precision has shown mediocre cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 5.1%, subpar for an industrials business.

Taking a step back, we can see that Vishay Precision failed to improve its margin during that time. Its unexciting margin and trend likely have shareholders hoping for a change.

Vishay Precision’s free cash flow clocked in at $3.74 million in Q1, equivalent to a 5.2% margin. This cash profitability was in line with the comparable period last year and its five-year average.

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).

Vishay Precision historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 9.3%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

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. On average, Vishay Precision’s ROIC decreased by 4.6 percentage points annually over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

Vishay Precision is a profitable, well-capitalized company with $83.89 million of cash and $54.73 million of debt on its balance sheet. This $29.17 million net cash position is 8.8% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We struggled to find many positives in these results. Its EBITDA missed significantly and its EPS fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 4.3% to $23.83 immediately after reporting.

Updated: May 22, 2025 at 11:27 PM EDT

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

We see the value of companies helping their customers, but in the case of Vishay Precision, we’re out. To begin with, its revenue growth was weak over the last five years. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its declining EPS over the last five years makes it a less attractive asset to the public markets. On top of that, its declining operating margin shows the business has become less efficient.

Vishay Precision’s P/E ratio based on the next 12 months is 21.7x. This multiple tells us a lot of good news is priced in - we think there are better investment opportunities out there.

Wall Street analysts have a consensus one-year price target of $30.25 on the company (compared to the current share price of $26.31).

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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