Why Gentex Shares Slid and Then Recovered

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Gentex (Nasdaq: GNTX  ) were down as much as 11% early this morning after a subpar earnings report but battled back to finish essentially flat.

So what: The company, which makes electro-optical products such as automotive mirrors as well as fire safety gadgets, said EPS fell slightly to $0.29 a share from $0.30 a year ago, and revenue declined by 0.5% to $268.2 million. The results beat EPS projections by a penny but came up short on the top line. Gentex is heavily dependent on the European market, and CEO Fred Bauer said that "European economic conditions could have had a negative impact on product mix." Management guided for flat growth in the fourth quarter and scaled back full-year guidance for certain automotive products.

Now what: When stocks bounce back this quickly after a disappointing earnings report, it generally indicates that the market sees a buying opportunity. Shares of Gentex have fallen nearly 50% over the past year, but this is a market leader with 88% share in some segments, and it makes technical products with high barriers to entry. European weakness may continue to hamper revenue growth in the coming quarters, but as a long-term play, the price looks reasonable at a P/E of 14.5, not to mention a 3.1% dividend yield. Growth of 22% in North American mirror units in the past quarter indicates that there's still plenty of potential upside.

Want to keep track of Gentex? Just click here to add Gentex to your Watchlist.

Jeremy Bowman has no positions in the stocks mentioned above. The Motley Fool owns shares of Gentex. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2071600, ~/Articles/ArticleHandler.aspx, 12/20/2014 6:49:26 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement