In this piece, I have evaluated technology stocks Bel Fuse Inc. (BELFB) and Vuzix Corporation (VUZI) to determine which could generate better returns. After thoroughly evaluating these stocks, I think BELFB could be a better pick now for the reasons discussed throughout this article.
Rapid innovations are stimulating demand for newer and faster electrical and electronic products. Advanced technologies, such as AI, IoT, and 5G, are expected to keep boosting features of electronic products, driving their demand further.
The global consumer electronics market is expected to grow at a CAGR of 5% to reach approximately $1 trillion in 2027.
BELFB is a clear winner in terms of price performance, with 230.5% gains over the past year compared to VUZI’s 19.9% decline. BELFB has gained 64.1% over the past six months compared to VUZI’s 13.9% gain. Also, BELFB has returned 111.4% over the past nine months compared to VUZI’s 10.6%.
Here are the reasons why I think BEFB could perform better in the near term:
Recent Developments
On June 26, 2023, BELFB announced that it had closed on selling its building in Jersey City, New Jersey, for $5.9 million. BELFB’s corporate headquarters have been based in Jersey City for over 60 years, with the building at 206 Van Vorst Street utilized as its corporate headquarters for the past 20 years.
On June 8, 2023, BELFB announced the divestment of their Stewart Czech business, part of the Connectivity Solutions segment. The Stewart Czech business consists of two divisions where one operates as a distributor of other connectivity products and the other as a manufacturer of copper, fiber, and coaxial cable assemblies serving end markets, including telecommunications, networking, banking, and public administration.
The divestment allows BELFB to sharpen its focus and allocate resources to areas with higher growth and value-creation potential. By streamlining its operations and optimizing its portfolio, BELFB may be better positioned to enhance its competitive position and drive future success.
Conversely, on July 10, VUZI announced the receipt of an OEM purchase order for engineering services and waveguide and display engine products from a US-based company that is a leading provider of sophisticated digital imaging products for aerospace and defense and instrumentation solutions across multiple commercial and industrial systems.
Recent Financial Results
During the fiscal first quarter ended March 31, 2023, BELFB’s net sales increased 26.1% year-over-year to $172.34 million. Non-GAAP net earnings increased 272% year-over-year to $18.83 million. Also, its non-GAAP class A EPS came in at $1.41, representing an increase of 271.1% year-over-year.
On the contrary, VUZI’s loss from operations increased 4.2% year-over-year to $10.85 million for the first quarter that ended March 31, 2023. Its total operating expenses rose 7.7% from the previous-year quarter to $11.72 million. Its net loss came in at $10.24 million, while its loss per common share remained flat at $0.16.
Past and Expected Financial Performance
Over the past three years, BELFB’s revenue grew at a 13.6% CAGR. Analysts expect BELFB’s revenue to rise 1.9% this year. Its EPS is expected to grow by 8.9% in the next year.
Conversely, VUZI’s revenue increased at a CAGR of 25.6% over the past three years. Its revenue is expected to increase 52.2% this year, 42% in the -to-be-reported quarter ended June 2023, and 33.9% in the current quarter. However, its EPS is expected to fall 6.3% in the to-be-announced quarter.
Valuation
BELFB’s forward EV/Sales multiple of 1.13 is lower than VUZI’s 16.61. Additionally, BELFB’s forward P/S ratio of 1.07x is lower than VUZI’s 20.08x.
Thus, BELFB is relatively more affordable.
Profitability
BELFB is more profitable, with a trailing-12-month net income margin of 9% compared to VUZI’s negative 299.5%. In addition, BELFB’s trailing-12-month EBITDA margin of 14.55% compares to VUZI’s negative 293.5%.
Furthermore, BELFB’s trailing-12-month ROCE, ROTC, and ROTA of 25.21%, 14.40%, and 10.83% compared to the VUZI’s negative 32.88%, 21.57%, and 33.07%, respectively.
POWR Ratings
BELFB has an overall rating of A, which equates to a Strong Buy in our proprietary POWR Ratings system. Conversely, VUZI has an overall rating of F, translating to a Strong Sell. The POWR Ratings are calculated considering 118 different factors, each weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. BELFB has an A grade for Value. BELFB’s forward EV/Sales and P/S multiples of 1.13 and 1.07 are 62.7% and 63.7% lower than the 3.03 and 2.95 industry averages.
Conversely, VUZI has an F grade for Value and Quality. VUZI’s forward EV/Sales and P/S multiples of 16.61 and 20.08 are 447.9% and 580.9% higher than the 3.03 and 2.95 industry averages, respectively.
Among the 41 stocks in the Technology - Electronics industry, BELFB is ranked #2, while VUZI is ranked last.
Beyond what we’ve stated above, we have also rated both stocks for Growth, Momentum, Stability, and Sentiment. Get all BELFB ratings here. Click here to view VUZI ratings.
The Winner
Given VUZI's relatively weak financial performance, low profitability, and elevated valuation multiples, BELFB appears a more favorable investment choice.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Technology - Electronics industry here.
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BELFB shares were trading at $57.43 per share on Friday morning, up $1.80 (+3.24%). Year-to-date, BELFB has gained 75.38%, versus a 18.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
The post Which Is the Hot Tech Pick of the Week: Bel Fuse (BELFB) vs. Vuzix Corporation (VUZI) appeared first on StockNews.com