LFUS - Embedded Expectations Analysis - 2020 11 02
Littelfuse, Inc. (LFUS:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 28.2x Uniform P/E. Even at these levels, the market has bearish expectations for the firm, and management may be concerned about their financial position, inventory levels, and their production capabilitiesSpecifically, management may lack confidence in their ability to improve their financial position and continue improving their receivable days. Management may also have concerns about packaging, their current inventory levels, and the time it will take to successfully align new opportunities with their valuations. In addition, they may lack confidence in their ability to keep their production facilities operational, improve margins, and drive long-term profitable growth for the Industrial Products business. Finally, they may be exaggerating production capabilities in Europe, and they may have concerns about macroeconomic headwinds
Littelfuse is a manufacturer of technologies in circuit protection, power control and sensing. The company has three segments: Electronics, which provides fuses and fuse accessories, positive temperature coefficient resettable fuses, polymer electrostatic discharge suppressors, varistors, and gas discharge tubes; Automotive, which consists of circuit protection, power control and sensing technologies for original equipment manufacturers, Tier-I suppliers and parts distributors in the passenger car, agricultural, construction and other commercial vehicle industries; and Industrial, which includes power fuses, protection relays and controls and other circuit protection products.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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