What a brutal six months it’s been for Rogers. The stock has dropped 38.6% and now trades at a new 52-week low of $66.64, rattling many shareholders. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Is now the time to buy Rogers, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Despite the more favorable entry price, we’re sitting this one out for now. Here are three reasons why we avoid ROG and a stock we’d rather own.
With roots dating back to 1832, making it one of America’s oldest continuously operating companies, Rogers (NYSE:ROG) designs and manufactures specialized engineered materials and components used in electric vehicles, telecommunications, renewable energy, and other high-performance applications.
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Rogers’s demand was weak and its revenue declined by 1.6% per year. This wasn’t a great result and signals it’s a low quality business.
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.
Sadly for Rogers, its EPS declined by 13.1% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Rogers’s margin dropped by 7 percentage points over the last five years. Continued declines could signal it is in the middle of an investment cycle. Rogers’s free cash flow margin for the trailing 12 months was 8.6%.
We cheer for all companies serving everyday consumers, but in the case of Rogers, we’ll be cheering from the sidelines. Following the recent decline, the stock trades at 18.8× forward price-to-earnings (or $66.64 per share). This multiple tells us a lot of good news is priced in – we think there are better opportunities elsewhere. We’d recommend looking at the most entrenched endpoint security platform on the market.
