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2 Reasons to Like BDC (and 1 Not So Much)

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BDC Cover Image

Over the last six months, Belden’s shares have sunk to $101.50, producing a disappointing 12.5% loss - a stark contrast to the S&P 500’s 8.7% gain. This might have investors contemplating their next move.

Following the pullback, is now an opportune time to buy BDC? Find out in our full research report, it’s free.

Why Does BDC Stock Spark Debate?

With its enamel-coated copper wire used in WWI for the Allied forces, Belden (NYSE: BDC) designs, manufactures, and sells electronic components to various industries.

Two Positive Attributes:

1. Projected Revenue Growth Is Remarkable

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite, though some deceleration is natural as businesses become larger.

Over the next 12 months, sell-side analysts expect Belden’s revenue to rise by 19.8%, an improvement versus its 7.9% annualized growth for the past five years. This projection is eye-popping and implies its newer products and services will fuel better top-line performance.

2. Outstanding Long-Term EPS Growth

Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.

Belden’s EPS grew at 20.6% compounded annual growth rate over the last five years, higher than its 7.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Belden Trailing 12-Month EPS (Non-GAAP)

One Reason to Be Careful:

New Investments Fail to Bear Fruit as ROIC Declines

We like to invest in businesses with high returns, but the trend in a company’s ROIC can also be an early indicator of future business quality.

On average, Belden’s ROIC decreased by 4.2 percentage points annually each year over the last few years. Only time will tell if its new bets can bear fruit and potentially reverse the trend.

Belden Trailing 12-Month Return On Invested Capital

Final Judgment

Belden has huge potential even though it has some open questions. With the recent decline, the stock trades at 12.1× forward P/E (or $101.50 per share). Is now a good time to initiate a position? See for yourself in our full research report, it’s free.

Stocks We Like Even More Than Belden

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