Deswell Industries, Inc. reports 32.8% EBITDA decline in 2019 and 2.5 pp EBITDA Margin decline from 6.5% to 4.0%
06/11/2019 • About Deswell Industries, Inc. (
$DSWL) • By InTwits
Deswell Industries, Inc. reported FY2019 financial results today. Here are the key drivers of the company's long term financial model:
- Deswell Industries, Inc. is a growth stock: FY2019 revenue growth was 9.7%, 5 year revenue CAGR was 10.2% at FY2019 ROIC 0.63%
- The company has potentially unprofitable business model: ROIC is 0.6%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Deswell Industries, Inc.'s Revenue increased on 9.7%. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 2.5 pp from 6.5% to 4.0% in FY2019.
Gross Margin decreased slightly on 0.59 pp from 16.0% to 15.4% in FY2019. SG&A as a % of Revenue showed almost no change in FY2019. SG&A as a % of Revenue stuck to a declining trend at -2.5 pp per annum in the last 5 years.
Net Income margin decreased on 3.8 pp from 10.2% to 6.4% in FY2019.
Investments (CAPEX, working capital and M&A)
In FY2019 the company had CAPEX/Revenue of 1.3%. The company showed small growth in CAPEX/Revenue of 1.3 pp from in FY2016 to 1.3% in FY2019.
Return on investment
The company operates at low ROIC (0.6%) and ROE (5.2%). ROIC decreased slightly on 1.6 pp from 2.2% to 0.63% in FY2019. ROE decreased on 2.7 pp from 7.9% to 5.2% in FY2019. ROIC followed a growing trend at 2.1 pp per annum in FY2015-FY2019.
Leverage (Debt)
The company has no debt. Cash decreased on 5.4%.
Valuation and dividends
Deswell Industries, Inc.'s trades at EV/EBITDA 10.7x and P/E 10.0x.
Financial and operational results
FY ended 03/31/2019
Deswell Industries, Inc. ($DSWL) key annual financial indicators| mln. $ | 2015 | 2016 | 2017 | 2018 | 2019 | 2019/2018 |
|---|
P&L
|
|---|
| Revenue | 38.076 | 44.568 | 44.522 | 60.667 | 66.581 | 9.7% |
| Gross Profit | 4.224 | 4.793 | 7.449 | 9.714 | 10.270 | 5.7% |
| SG&A | 9.123 | 9.119 | 8.856 | 8.806 | 9.459 | 7.4% |
| EBITDA | -1.982 | | | 3.940 | 2.647 | -32.8% |
| Net Income | -2.808 | -4.934 | 1.376 | 6.190 | 4.273 | -31.0% |
Balance Sheet
|
|---|
| Cash | 14.325 | 11.996 | 8.078 | 15.192 | 14.371 | -5.4% |
| Short Term Debt | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |
| Long Term Debt | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |
Cash flow
|
|---|
| Capex | 0.890 | | | 1.707 | 0.878 | -48.6% |
Ratios
|
|---|
| Revenue growth | -7.0% | 17.1% | -0.1% | 36.3% | 9.7% | |
| EBITDA growth | -38.3% | | | | -32.8% | |
|
|---|
| Gross Margin | 11.1% | 10.8% | 16.7% | 16.0% | 15.4% | -0.6% |
| EBITDA Margin | -5.2% | | | 6.5% | 4.0% | -2.5% |
| SG&A, % of revenue | 24.0% | 20.5% | 19.9% | 14.5% | 14.2% | -0.3% |
| Net Income Margin | -7.4% | -11.1% | 3.1% | 10.2% | 6.4% | -3.8% |
| CAPEX, % of revenue | 2.3% | | | 2.8% | 1.3% | -1.5% |
|
|---|
| ROIC | -5.4% | -6.5% | -2.7% | 2.2% | 0.6% | -1.6% |
| ROE | -3.2% | -6.1% | 1.8% | 7.9% | 5.2% | -2.7% |
| Net Debt/EBITDA | | | | -3.9x | -5.4x | -1.6x |
Peers in Electronic Manufacturing Services
Below you can find Deswell Industries, Inc. benchmarking vs. other companies in Electronic Manufacturing Services industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| RF Industries, Ltd. ($RFIL) | 41.9% | -7.8% | -24.0% | 118.4% | |
| Alpine 4 Technologies Ltd ($ALPP) | | 35,893.8% | 5.8% | 71.5% | |
| Kemet Corporation ($KEM) | -1.3% | -10.7% | 3.1% | 58.4% | |
| SMTC Corporation ($SMTX) | -3.5% | -23.9% | -17.1% | 55.2% | |
| IEC Electronics Corp. ($IEC) | 5.1% | 0.0% | -24.1% | 21.2% | |
| |
|---|
| Median (27 companies) | 2.6% | 0.6% | 3.0% | 7.1% | 15.0% |
|---|
| Deswell Industries, Inc. ($DSWL) | | 17.1% | -0.1% | 36.3% | 9.7% |
Top companies by Gross margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Neonode Inc. ($NEON) | 66.0% | 86.9% | 77.1% | 89.2% | |
| Andrea Electronics Corp ($ANDR) | 99.1% | 88.5% | 96.2% | 70.4% | |
| Data I/O Corporation ($DAIO) | 52.4% | 55.0% | 58.9% | 59.4% | |
| IPG Photonics Corporation ($IPGP) | 54.6% | 54.9% | 56.6% | 54.8% | |
| CTS Corporation ($CTS) | 33.2% | 35.4% | 33.2% | 35.1% | |
| |
|---|
| Median (27 companies) | 22.1% | 22.2% | 13.8% | 12.1% | 9.4% |
|---|
| Deswell Industries, Inc. ($DSWL) | 11.1% | 10.8% | 16.7% | 16.0% | 15.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| IPG Photonics Corporation ($IPGP) | 42.4% | 41.8% | 44.7% | 40.9% | |
| TE Connectivity Ltd. ($TEL) | 19.3% | 20.9% | 20.4% | 21.4% | |
| CTS Corporation ($CTS) | 9.0% | 20.7% | 14.0% | 17.8% | |
| Methode Electronics, Inc. ($MEI) | 15.4% | 16.5% | 16.5% | 16.1% | |
| RF Industries, Ltd. ($RFIL) | 6.7% | -12.1% | 3.1% | 15.9% | |
| |
|---|
| Median (27 companies) | 5.6% | 5.2% | 4.8% | 4.7% | 7.7% |
|---|
| Deswell Industries, Inc. ($DSWL) | -5.2% | | | 6.5% | 4.0% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Maxwell Technologies, Inc. ($MXWL) | 2.5% | 4.9% | 6.6% | 11.3% | |
| IPG Photonics Corporation ($IPGP) | 7.8% | 12.6% | 9.0% | 11.0% | |
| eMagin Corporation ($EMAN) | 4.7% | 6.7% | 6.2% | 8.8% | |
| TE Connectivity Ltd. ($TEL) | 4.9% | 5.3% | 5.6% | 6.7% | |
| CTS Corporation ($CTS) | 2.5% | 5.2% | 4.3% | 6.1% | |
| |
|---|
| Median (27 companies) | 2.4% | 2.8% | 3.1% | 2.4% | 2.6% |
|---|
| Deswell Industries, Inc. ($DSWL) | 2.3% | | | 2.8% | 1.3% |
Top companies by ROIC, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| RF Industries, Ltd. ($RFIL) | 4.6% | -18.7% | 0.9% | 29.2% | |
| IPG Photonics Corporation ($IPGP) | 27.8% | 25.1% | 29.9% | 22.9% | |
| Methode Electronics, Inc. ($MEI) | 26.1% | 22.7% | 20.8% | 19.2% | |
| TE Connectivity Ltd. ($TEL) | 15.1% | 15.9% | 16.2% | 18.4% | |
| Kemet Corporation ($KEM) | 3.8% | 6.2% | 6.9% | 16.9% | |
| |
|---|
| Median (29 companies) | 5.3% | 6.7% | 5.7% | 6.7% | 15.1% |
|---|
| Deswell Industries, Inc. ($DSWL) | -5.4% | -6.5% | -2.7% | 2.2% | 0.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Alpine 4 Technologies Ltd ($ALPP) | | | 34.1x | 65.7x | |
| SigmaTron International, Inc. ($SGMA) | 4.1x | 2.4x | 3.4x | 16.0x | |
| SMTC Corporation ($SMTX) | 1.8x | 1.0x | | 11.3x | |
| IEC Electronics Corp. ($IEC) | 14.0x | 2.0x | 5.6x | 4.9x | |
| Key Tronic Corporation ($KTCC) | 3.4x | 2.6x | 2.5x | 3.9x | |
| |
|---|
| Median (22 companies) | -0.9x | 0.2x | 0.2x | 0.5x | 0.1x |
|---|
| Deswell Industries, Inc. ($DSWL) | | | | -3.9x | -5.4x |
