Up 2.3x from its low in March 2020, at the current price of $259 per share, we believe Littelfuse stock (NASDAQ: LFUS) has further upside potential. Littelfuse, a circuit protection product manufacturer, has seen its stock rise from $113 to $259 off its March 2020 low, more than the S&P which increased by over 85% from its lows. Further, the stock is up 40% from the level it was at before the pandemic. However, we believe that Littelfuse stock could rise more than 10% to new levels above its recent high of $288, driven by expectations of continuing demand growth and strong Q1 2021 results. Our dashboard What Factors Drove 51% Change In Littelfuse Stock Between 2018 And Now? has the underlying numbers behind our thinking.

Littelfuse stock’s rise since late 2018 came despite a 16% drop in revenues from $1.72 billion in FY 2018 to $1.45 billion in FY 2020. Net margins dropped from 9.6% to 9% over this period, and combined with a 2% drop in the outstanding share count, EPS (earnings-per-share) fell 20% from $6.62 to $5.33 over this period.

Further, Littelfuse’s P/E (price-to-earnings) multiple rose from 26x in 2018 to 48x by 2020 end, and currently trades at around the same level. We believe that the company’s P/E ratio has the potential to rise further in the near term on expectations of continuing demand growth and a favorable shareholder return policy, thus driving the stock price higher.

Where Is The Stock Headed?

The global spread of coronavirus and the resulting lockdowns had affected semiconductor demand in early 2020, but things have improved since. This is evident from the company’s Q1 2021 earnings, where revenue came in higher at $464 million from $346 million for the same period last year. Operating expenses rose at a rate slower than the growth in revenue, which led to operating margins jumping from 12.9% to 16.5%. Combined with a slightly lower effective tax rate, EPS jumped from $1.01 to $2.35 over this period.

Additionally, with the lockdowns being lifted and the steady continued growth in demand for electronic and circuit protection products from a variety of industries, we believe the company’s revenues stand to benefit further in the medium term. Further, if the company can successfully continue controlling expenses going forward, a rise in investor expectations could drive up the company’s P/E multiple. We believe that Littelfuse stock can rise more than 10% from current levels, to set new highs above $288.

While Littelfuse stock may move higher, it is helpful to know how its peers stack up. Littelfuse Stock Comparison With Peers summarizes how Littelfuse compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

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