2024-04-22 11:25:52 ET
Summary
- Rogers Corporation's share price has decreased due to weaker volumes.
- Both gross profit and EBITDA margins remain high despite a temporary contraction.
- The balance sheet is very robust as the company has paid down almost all its long-term debt.
- The company is expected to report record-high revenues in 2025, and the management is ready to resume the M&A strategy.
- The recent share price decline represents a good opportunity.
Investment thesis
When DuPont de Nemours, Inc. ( DD ) announced it would acquire Rogers Corporation ( ROG ) for $5.2 billion in November 2021, Rogers' shares soared as the offer represented $277 per share, which was a 33% premium over the company's share price at the time of the announcement. A year later, in early November 2022, the planned purchase was canceled due to Chinese regulatory issues . As a consequence, Rogers' shares decreased by over 60% in the blink of an eye, and although they recovered part of the lost ground in H1 2023 thanks to a 70% appreciation, the price has decreased again by over 35% in H2 2023 and so far, in 2024.
A few days before the Q1 2024 results come out (on April 25), investors are not expecting any recovery sign, but it should be said that situation of Rogers Corporation is not bad in itself since it is indeed a profitable company with a strong balance sheet that enjoyed acceptable revenue growth rates in recent years and whose market cap currently stands at $2 billion. For these reasons, the P/S ratio, despite being a bit depressed, is still at 2.247 as investors are willing to give considerable value to the company's sales. The point is that shares were greatly inflated for a year on the promise of a generous takeover, but leaving aside this post-pandemic stage, the current share price accumulates a 47.1% decline from the peak of $206.43 reached in May 2019 influenced by several headwinds that the company is currently facing....
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Rogers: Short-Term Headwinds Are Likely Temporary