Jim Cramer’s Latest Lightning Round: 10 Stocks to Watch

6. Littelfuse, Inc. (NASDAQ:LFUS)

Number of Hedge Fund Holders: 30

Littelfuse, Inc. (NASDAQ:LFUS) designs and manufactures electronic components. Within the Electronics segment, it produces a wide range of products, including fuses and diodes, catering to critical markets such as automotive and telecommunications.

Its Transportation segment specializes in circuit protection solutions specifically for heavy-duty vehicles and agricultural applications. Meanwhile, the company’s Industrial segment is dedicated to safety devices aimed at improving renewable energy systems and factory automation processes. It serves over 100,000 end customers across various industries.

The stock is trading at a forward PE multiple of 31, an over 30% premium compared to its sector median. With regards to the company, Cramer said:

”…It’s got a huge multiple for its growth rate, and that is worrisome to me. I’m going to have to say we got to come back with something that is less expensive.”

While the stock is expensive, Littelfuse (NASDAQ:LFUS) reported an operating cash flow of $69 million in the second quarter, contributing to a year-to-date free cash flow generation of $92 million, which shows a remarkable conversion rate of 98%.

The company has also effectively managed its inventory, reducing both inventory days and dollar amounts, which has positively impacted its cash flow. Management has a strong focus on financial health, hence the company ended the quarter with $562 million in cash and maintained a net debt-to-EBITDA ratio of 1.6 times.

Management continues to emphasize achieving a 100% free cash flow conversion rate for the year, which is in line with their long-term strategic goals. Littelfuse (NASDAQ:LFUS) plans to prioritize free cash flow for acquisitions while also returning capital to shareholders through dividends and share buybacks.

In the first half of 2024, the company has already returned $73 million to shareholders. Since its inception in 1927, it has demonstrated a strong capacity for cash generation, evidenced by a consistent 12% compounded annual growth rate in its dividend.