Bel Fuse’s stock price has taken a beating over the past six months, shedding 54.9% of its value and falling to a new 52-week low of $46 per share. This might have investors contemplating their next move.
Is there a buying opportunity in Bel Fuse, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Even though the stock has become cheaper, we're cautious about Bel Fuse. Here are three reasons why there are better opportunities than 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 Disappoints
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Bel Fuse’s sales grew at a sluggish 1.7% compounded annual growth rate over the last five years. This fell short of our benchmarks. 
2. 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 30% gross margin over the last five years. That means Bel Fuse paid its suppliers a lot of money ($70.04 for every $100 in revenue) to run its business. 
3. EPS Took a Dip Over the Last Two Years
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Sadly for Bel Fuse, its EPS declined by more than its revenue over the last two years, dropping 12.2%. This tells us the company struggled to adjust to shrinking demand.
Final Judgment
Bel Fuse isn’t a terrible business, but it doesn’t pass our quality test. After the recent drawdown, the stock trades at 11.6× forward price-to-earnings (or $46 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at an all-weather company that owns household favorite Taco Bell.
Stocks We Like More Than Bel Fuse
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