Bel Fuse currently trades at $81.90 per share and has shown little upside over the past six months, posting a middling return of 1.3%. The stock also fell short of the S&P 500’s 16.9% gain during that period.
Is there a buying opportunity in Bel Fuse, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
We're cautious about Bel Fuse. Here are three reasons why you should be careful with BELFA and a stock we'd rather own.
Why Is Bel Fuse Not Exciting?
Founded by 26-year-old Elliot Bernstein during the electronics boom after WW2, Bel Fuse (NASDAQ:BELF.A) provides electronic systems and devices to the telecommunications, networking, transportation, and industrial sectors.
1. Long-Term Revenue Growth Flatter Than a Pancake
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Unfortunately, Bel Fuse struggled to consistently increase demand as its $524.9 million of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and is a sign of lacking business quality. 
2. Projected Revenue Growth Is Slim
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.
Over the next 12 months, sell-side analysts expect Bel Fuse’s revenue to rise by 3.1%. While this projection implies its newer products and services will catalyze better top-line performance, it is still below the sector average.
3. Low Gross Margin Hinders Flexibility
At StockStory, we prefer high gross margin businesses because they indicate the company has pricing power or differentiated products, giving it a chance to generate higher operating profits.
Bel Fuse’s gross margin is slightly below the average industrials company, giving it less room to invest in areas such as research and development. As you can see below, it averaged a 29.2% gross margin over the last five years. Said differently, Bel Fuse had to pay a chunky $70.82 to its suppliers for every $100 in revenue. 
Final Judgment
Bel Fuse isn’t a terrible business, but it doesn’t pass our bar. With its shares lagging the market recently, the stock trades at 18.4× forward price-to-earnings (or $81.90 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We're fairly confident there are better investments elsewhere. Let us point you toward one of our top software and edge computing picks.
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