Vicor: When Growth Consumes Itself
Tips E-07: A 1-minute summary of my fundamental analysis of NASDAQ Vicor Corporation (VICR)
Investment Thesis
Despite operating in a growing niche of high-performance power electronics, Vicor’s high SG&A expenses, volatile returns, and reliance on temporary tax benefits weaken its investment case. The market price implies unrealistic improvements in growth, margins, and capital efficiency.
Main Business
Vicor designs modular power solutions that manage voltage conversion for performance-critical systems. Vicor now reports two lines - Brick Products (high-mix, low-volume) and Advanced Products (low-mix, high-volume). Advanced Products drive over half its revenue, with U.S. sales now only 50% of the total.
Growth
From 2015–2024, revenue grew at a 5.6% CAGR. However, performance has been inconsistent - affected by limited customers, manufacturing complexity, and product mix transitions.
Profitability
Profitability improved post-consolidation (2019), but structural inefficiencies keep returns below the cost of equity. While gross margins rose, high SG&A spending offsets operational gains.
Financial Strength
Vicor has no debt, USD 296 million in cash, and robust operating cash flow. Yet its heavy reinvestment needs indicate poor return-to-growth conversion.
Peer Performance
Vicor lags peers in returns and margins, showing structural cost disadvantages. Persistent underperformance suggests that its claim of technological advantages have yet to translate into superior profitability or consistent returns.
Valuation
Market pricing assumes unrealistic growth, margin, and efficiency improvements far above historical and industry norms. Given operational volatility, weak cost control, and temporary tax advantages, Vicor appears materially overvalued.
For more insights and valuation details, refer to the original article on Seeking Alpha titled “Is Vicor's Growth Story Overhyped? The Fundamentals Say, Yes”
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Disclaimer & DisclosureI am not an investment adviser, security analyst, or stockbroker. The contents are meant for educational purposes and should not be taken as any recommendation to purchase or dispose of shares in the featured companies. Investments or strategies mentioned on this website may not be suitable for you and you should have your own independent decision regarding them.
The opinions expressed here are based on information I consider reliable but I do not warrant its completeness or accuracy and should not be relied on as such.
I may have equity interests in some of the companies featured.
This blog is reader-supported. When you buy through links in the post, the blog will earn a small commission. The payment comes from the retailer and not from you.
Disclaimer & Disclosure
I am not an investment adviser, security analyst, or stockbroker. The contents are meant for educational purposes and should not be taken as any recommendation to purchase or dispose of shares in the featured companies. Investments or strategies mentioned on this website may not be suitable for you and you should have your own independent decision regarding them.
The opinions expressed here are based on information I consider reliable but I do not warrant its completeness or accuracy and should not be relied on as such.
I may have equity interests in some of the companies featured.
This blog is reader-supported. When you buy through links in the post, the blog will earn a small commission. The payment comes from the retailer and not from you.
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