In this updated coverage research report, we reexamine the information technology sector company Littelfuse Incorporated — LFUS 0.00%↑ — to see if it continues to meet QualityValue Investing’s (QVI) Real-Time Stock Picks criteria based on our proprietary checklist analysis of the business’s current wealth and the share price’s present value.
Littelfuse | Company Current Wealth
Value Proposition
Littelfuse is a dividend-paying small-cap stock in the information technology sector’s electronic components industry. It was added to the QVI Real-Time Stock Picks on October 19, 2022, at a $200.09 cost basis per share, adjusted for dividends.
Littelfuse, Inc. designs, manufactures, and sells electronic components, modules, and subassemblies in the Americas, Asia-Pacific, and Europe. The company operates through its Electronic, Transportation, and Industrial segments. Littelfuse, Inc. was founded in 1927 and is headquartered in Chicago, Illinois, USA.
Economic Moat
Morningstar assigns Littelfuse a narrow moat rating based on its switching costs, excess returns on invested capital, and sticky customer relationships.
QVI’s Value Proposition Elevator Pitch for LFUS
Littelfuse is a near-century-old electronic component manufacturer that generates sustainable profits and cash flows by piling ’em high and selling ’em (relatively) cheap. Unlike the consumer, energy, materials, and industrials sectors, Littelfuse operates with a lesser threat of low-cost producer commoditization due to the technology space’s affinity for network effect and switching costs.
QVI’s value proposition rating for Littelfuse: Bullish.
Returns on Management
Revenue Growth and Net Profit Margin
Per the table below, Littelfuse’s trailing three-year annualized revenue growth was double-digit positive and aligned with the S&P 500 topline growth of 16.30%. In contrast, the company’s negative revenue growth of -10.10% lagged the broader market’s positive +18.10% increase for the most recently reported twelve months.
Further down the income statement, Littelfuse had a high-single-digit net profit margin from a 36.64% gross margin, underperforming the S&P 500’s net of 20.80% from a gross of 54.00%.
Returns on Equity and Invested Capital
Littelfuse’s senior management produced a return on equity, or ROE, below QVI’s targeted threshold and the S&P 500’s ROE of 56.60%.
Stock buyback programs often elevate ROE, and in April, Littelfuse’s board of directors authorized $300 million of share repurchases through April 2027.
Littelfuse’s return on invested capital, or ROIC, was under QVI’s threshold and trailed the broader market’s 23.30% return. In QVI’s November 2023 report, LFUS was meeting the ROE and ROIC thresholds. Moreover, the company’s ROIC didn’t exceed its weighted average cost of capital, or WACC, demonstrating that its senior executives are currently struggling with capital allocations (Source of WACC: GuruFocus).
QVI’s business fundamentals rating for Littelfuse: Neutral.
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Next, we’ll look at the company’s enterprise downsize risks, the stock price’s present value, including share price downside risks, and the investment thesis, each exclusive to Quality Value Investing’s premium (paying) subscribers.
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Unless noted, all data presented is sourced from Charles Schwab & Co. and Yahoo Finance as of the market close on December 3, 2024, and intended for illustration only.
Disclosure: As of the date of this research report, I/we held no beneficial positions in LFUS common shares in our family portfolio. I wrote this report myself, and it expresses my own opinions. I am not receiving compensation for it other than from Substack paid subscriptions. I have no business relationship with any company whose stock is mentioned in this post.
Additional Disclosure: Quality Value Investing by David J. Waldron’s primary ticker research reports are for informational purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, i.e., not tailored to individual needs nor intended for portfolio construction beyond his family portfolio, which is presented solely for educational purposes. David is an individual investor and author, not an investment adviser. Readers should always engage in independent research or due diligence and consider, as appropriate, consulting a fee-only certified financial planner, licensed discount broker/dealer, flat fee registered investment adviser, certified public accountant, or specialized attorney before making any investment, income tax, or estate planning decisions.
