From CSFB, 01 November:
Vishay Intertechnology (vsh, $30, BUY) Target (12 Months): $40
Earnings Exceed Expectations- Yet EPS Growth Is Certain To Slow, Current
Valuation Ignores Balance Sheet And Earnings Power
In the third quarter, VSH saw stronger than expected profitability across all
business segments due to increased volume and selling prices and continuing
cost reductions.
We are reiterating our "Buy" rating on shares of Vishay with a 12-month
target price of $40, up over 34% from current levels. While VSH reported
record results in sales and net income, exceeding both the consensus and our
estimates, growth is likely to slow in the second half of 2001 and resume in
the second half of 2002.
Today profitability is well above normalized rates; despite exciting growth
opportunities, synergies are likely to decline.
Nevertheless, with EPS estimated at $4.50 per share in 2001, net income at $
610 million, free cash of $340 million and no debt, at $29 per share, we find
VSH very attractive.
Current valuation ignores the level of earnings, balance sheet, and
opportunities for acquisition or share repurchase.
EPS EPS Annual Prev.
12/01E $4.46 $4.48
12/00E 3.86 3.43
12/99A 0.75
This is a forward 12/01E PE of 6.7 on projected growth of 15.5% yoy.
The target price, 40, is a forward PE of 9 on that estimate.
Also, on 30 Oct. 2000, Merrill's (Jerry Labowitz) new target is upper 50's
on an estimate, recently revised upward, of 4.30 for FY2001. Which interestingly
is a lower estimate than CSFB. Obviously, ML thinks the company deserves
a higher PE.
Lot of good in the ML report, including:
Table 2: Vishay Financial Metrics
Sep-00 Jun-00 Mar-00 Dec-99 Sep-99
Cash 255 172 125 105 102
COGS/Avg Inv. 3.4 3.4 3.3 3.1 2.9
LT Debt/Total Cap 5% 8% 30% 33% 35%
EBIT/Avg Total Cap 28% 20% 14% 10% 8%
ROE (Average) 30% 22% 15% 10% 8%
Source: Merrill Lynch, Vishay Intertechnology |
