Stock Story -
Power conversion and control solutions provider Vicor Corporation (NASDAQ:VICR) reported results ahead of analysts' expectations in Q2 CY2024, with revenue down 19.6% year on year to $85.85 million. It made a GAAP loss of $0.03 per share, down from its profit of $0.38 per share in the same quarter last year.
Is now the time to buy Vicor? Find out by reading the original article on StockStory, it's free.
Vicor (VICR) Q2 CY2024 Highlights:
- Revenue: $85.85 million vs analyst estimates of $81.77 million (5% beat)
- EPS: -$0.03 vs analyst estimates of $0.05 (-$0.08 miss)
- Gross Margin (GAAP): 49.8%, down from 51.7% in the same quarter last year
- Market Capitalization: $1.67 billion
Founded by a researcher at the Massachusetts Institute of Technology, Vicor (NASDAQ:VICR) provides electrical power conversion and delivery products for a range of industries.
Electronic ComponentsLike 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.
Sales GrowthA company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Regrettably, Vicor's sales grew at a weak 5.6% compounded annual growth rate over the last five years. This shows it failed to expand in any major way 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. Vicor's recent history shows its demand slowed as its revenue was flat over the last two years.
This quarter, Vicor's revenue fell 19.6% year on year to $85.85 million but beat Wall Street's estimates by 5%. Looking ahead, Wall Street expects revenue to decline 6.9% over the next 12 months.
Operating MarginRead More Operating margin is an important measure of profitability. It’s the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. Operating margin is also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Vicor has done a decent job managing its expenses over the last five years. The company has produced an average operating margin of 9.4%, higher than the broader industrials sector.
Looking at the trend in its profitability, Vicor's annual operating margin rose by 4 percentage points over the last five years, showing its efficiency has improved.
In Q2, Vicor's breakeven margin was down 16.5 percentage points year on year. Since Vicor's operating margin decreased more than its gross margin, we can assume the company was recently less efficient because its general expenses like sales, marketing, and administrative overhead increased.
EPSRead MoreWe track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable. Sadly for Vicor, its EPS declined by 33.6% annually over the last five years while its revenue grew by 5.6%. However, its operating margin actually expanded during this timeframe, telling us non-fundamental factors affected its ultimate earnings.
We can take a deeper look into Vicor's earnings to better understand the drivers of its performance. A five-year view shows Vicor has diluted its shareholders, growing its share count by 9.2%. This dilution overshadowed its increased operating efficiency and has led to lower per share 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 also analyze EPS over a shorter period to see if we are missing a change in the business. For Vicor, its two-year annual EPS declines of 51.2% show it's continued to underperform. These results were bad no matter how you slice the data.
In Q2, Vicor reported EPS at negative $0.03, down from $0.38 in the same quarter last year. This print missed analysts' estimates. Over the next 12 months, Wall Street expects Vicor to grow its earnings. Analysts are projecting its EPS of $0.20 in the last year to climb by 170% to $0.54.
Key Takeaways from Vicor's Q2 Results We were impressed by how significantly Vicor blew past analysts' revenue expectations this quarter. On the other hand, its EPS missed. Overall, this was a mixed quarter for Vicor. The stock traded up 1.5% to $38.55 immediately following the results.
