Over the past six months, Littelfuse has been a great trade, beating the S&P 500 by 11%. Its stock price has climbed to $414.70, representing a healthy 22.7% increase. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now still a good time to buy LFUS? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.
Why Does Littelfuse Spark Debate?
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.
Two Positive Attributes:
1. Projected Revenue Growth Is Remarkable
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite, though some deceleration is natural as businesses become larger.
Over the next 12 months, sell-side analysts expect Littelfuse’s revenue to rise by 18.3%, an improvement versus its 8% annualized growth for the past five years. This projection is eye-popping and indicates its newer products and services will catalyze better top-line performance.
2. EPS Surges Higher Over the Last Two Years
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Littelfuse’s EPS grew at an astounding 22.8% compounded annual growth rate over the last two years, higher than its 8.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
One Reason to Be Careful:
New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
Unfortunately, Littelfuse’s ROIC has decreased significantly over the last few years. If its returns keep falling, it could suggest its profitable growth opportunities are drying up. We’ll keep a close eye.
Final Judgment
Littelfuse’s positive characteristics outweigh the negatives, and with its shares beating the market recently, the stock trades at 21.4× forward P/E (or $414.70 per share). Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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