The past six months have been a windfall for Rogers’s shareholders. The company’s stock price has jumped 54.6%, hitting $144.44 per share. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is there a buying opportunity in Rogers, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Do We Think Rogers Will Underperform?
Despite the momentum, we’re sitting this one out for now. Here are three reasons why there are better opportunities than ROG, plus one stock we’d rather own.
1. Long-Term Revenue Growth Flatter Than a Pancake
A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Rogers struggled to consistently increase demand as its $820.8 million of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and signals it’s a low quality business.
2. Shrinking Adjusted Operating Margin
Adjusted operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D. It also removes various one-time costs to paint a better picture of normalized profits.
Analyzing the trend in its profitability, Rogers’s adjusted operating margin decreased by 4.7 percentage points over the last five years. Rogers’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers. Its adjusted operating margin for the trailing 12 months was 8.8%.
3. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Rogers, its EPS declined by 13.9% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.
Final Judgment
Rogers falls short of our quality standards. Following the recent surge, the stock trades at 40.7× forward P/E (or $144.44 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better opportunities elsewhere. We’d recommend looking at the most dominant software business in the world.
Stocks We Would Buy Instead of Rogers
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