We came across a bullish thesis on Bel Fuse Inc. (BELFB) on Substack by Pound the Rock Investing. In this article, we will summarize the bulls’ thesis on BELFB. Bel Fuse Inc. (BELFB)’s share was trading at $77.30 as of March 27th. BELFB’s trailing and forward P/E were 24.94 and 14.16 respectively according to Yahoo Finance.
A close-up view of a technician soldering a circuit board in an electronics manufacturing facility.
Bel Fuse (BELFB) reported strong Q4 and FY 2024 results, reinforcing its growth trajectory and operational improvements. Despite a 19.7% organic sales decline due to distributor de-stocking and China-related headwinds, net sales reached $534M, with contributions from the transformative Enercon Technologies acquisition. Gross margins expanded to 37.8%, reflecting pricing improvements and cost efficiencies, while adjusted EBITDA margins improved to 19.0%, despite an overall EBITDA decline to $101.9M. With Magnetics and Power Solutions showing signs of recovery, Bel is poised for revenue growth of 18-20% in 2025.
Bel’s strategic initiatives include integrating Enercon to bolster its aerospace and defense presence while optimizing sales and procurement functions. Leadership transitions will also play a key role, with CFO Farouq Tuweiq taking over as CEO in May, marking the first non-family leadership in company history. Additionally, Bel is consolidating factories to drive cost efficiencies, following $11M in labor savings under Tuweiq’s leadership. The company is also targeting AI, defense, and aerospace markets for growth while anticipating inventory normalization among industrial and networking customers.
Bel’s valuation remains attractive, trading at 11.8x 2024 EV/EBITDA, still discounted compared to peers like TE Connectivity and Littelfuse. On pro forma numbers, EBITDA is expected to exceed $140M by 2026, reducing valuation to 8.5x EBITDA. A conservative 12.5x multiple implies a $125/share target, offering a 50% upside with a 21% two-year IRR. This excludes potential benefits from debt reduction, buybacks, and M&A. In a bullish scenario, a full recovery in Magnetics and Power, combined with margin expansion and capital returns, could drive even greater upside. With Bel not priced for growth, any positive surprises could result in further multiple expansion, making it an appealing investment opportunity.
Bel Fuse Inc. (BELFB) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 18 hedge fund portfolios held BELFB at the end of the fourth quarter which was 14 in the previous quarter. While we acknowledge the risk and potential of BELFB as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BELFB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article was originally published at Insider Monkey.