Gentex (NasdaqGS:GNTX) - Share price, News & Analysis

Q: What is the Fair Price of GNTX when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

GNTX ($27.39) is trading below our estimate of [[fair value]] ($60.8)

GNTX fundamental analysis
Snowflake Score
Valuation	3/6
Future Growth	5/6
Past Performance	1/6
Financial Health	6/6
Dividends	5/6

GNTX Stock Overview

Rewards

Trading at 54.9% below our estimate of its fair value

Earnings are forecast to grow 24.65% per year

Pays a reliable dividend of 1.75%

Risk Analysis

Significant insider selling over the past 3 months

Gentex Competitors

Autoliv

NYSE:ALV

US$6.8b

Lear

NYSE:LEA

US$8.5b

Visteon

NasdaqGS:VC

US$3.4b

BorgWarner

NYSE:BWA

US$9.0b

Price History & Performance

Summary of all time highs, changes and price drops for Gentex
Historical stock prices
Current Share Price	US$27.39
52 Week High	US$37.90
52 Week Low	US$26.16
Beta	0.87
1 Month Change	-4.26%
3 Month Change	-6.46%
1 Year Change	-16.92%
3 Year Change	0.74%
5 Year Change	58.32%
Change since IPO	6,274.41%

Recent News & Updates

Aug 06

Gentex (NASDAQ:GNTX) Will Be Looking To Turn Around Its Returns

What underlying fundamental trends can indicate that a company might be in decline? A business that's potentially in...

Aug 02

Gentex Corporation: More Expensive In Spite Of A Lower Price

The financial performance here has been mediocre at best, in my view. The company is less profitable now than it was in both 2019 and 2021. In spite of this, the shares are trading near a multi-year-high valuation, and the dividend yield is flat. Paying more and getting about the same is not great. While I like to sell deep out of the money puts on stocks like this, the premia on offer are too paltry to get excited about. I'd be very happy to buy if the stock dropped about 29% from current levels. It's been about 3 ½ months since I put out my "avoid" piece on Gentex Corporation (GNTX), and in that time the shares are down about 4.7% against a loss of ~3.9% for the S&P 500. The company has reported earnings since, so I thought I'd review the name yet again. After all, a stock trading at $28 is a slightly less risky investment than when the same stock is trading at $29.60. I'll make the determination by looking at the updated financial history here, and by looking at the stock as a thing distinct from the underlying business. Finally, right on cue, I bragged in my previous missive on this name about the premia I'd earned selling puts, but I couldn't sell puts 3 ½ months ago as I considered the premia for reasonable strike prices to be too thin. Now that the shares have fallen in price, it's time to revisit this and determine whether we can make a decent return by selling puts. We're all busy, and many of us spend a great deal of time searching for ways to save time. If you're such a person, you're in luck, because I'm about to offer you my handy "thesis statement" paragraph. It's here where I offer up the gist of my thinking in a convenient, single-paragraph package. I think this stock remains dead money for the moment. The shares are more expensive now than they were when last I reviewed the name, in spite of the fact that the company is far less profitable now than it was in 2021 or 2019. In my previous missive, I pointed out that an investment in a 10-year Treasury Note would produce greater cash flows at arguably less risk, and nothing's changed to convince me otherwise. Finally, while I made some decent returns selling puts previously, that route is no longer available in my view, as the premia on offer are too thin to justify the effort. I think we have to sit around and wait for the inevitable price drop before getting excited. I'd be very happy to buy this name, but it'd need to be trading about 29% cheaper than it currently is before I do so. Financial Snapshot The financial performance for the first half of this year has been poor in my view. Although sales are up slightly relative to the same period in 2021, net income is down significantly. Specifically, revenue is up by about 2.2%, while net income is off by $40 million, or 20%. This is a consequence of the fact that growth in Engineering and SG&A expenses swamped the 2% uptick in sales, with the former up by 14%, and the latter up by over 23%. If your instinct is to find refuge in the idea that 2021 was a particularly good year, making comparisons to that period particularly challenging, allow me to destroy that refuge. For instance, results are even worse in 2022 when compared to the same period in 2019. Sales in 2022 were actually lower slightly (down .6%) and net income is fully 25% lower now than it was then. The same story emerges when comparing 2019 to 2022. Engineering expenses are now about 15% higher than they were, and SG&A expenses are about 36% higher than in 2019. One obvious bright spot is the capital structure. There is virtually no debt here, which obviously reduces the level of risk dramatically. Finally, as the company stated, the dividend will "grow roughly in line with net income growth", I think it would be wise for investors in this company to buy only if they're comfortable with the current yield. The dividend has remained flat for the better part of three years, and I expect this to continue. That said, the capital structure is rock solid, implying that the dividend is quite secure, and for that reason, I'd be very happy to buy in at the right price. Gentex Financials (Gentex investor relations) The Stock You may wonder why my social life is in the miserable state it's in. I'm about to offer you an insight into one of the many reasons. I repeat myself. Often. With that out of the way, prepare for some more repetition when I write to you that I think the business and the stock are quite distinct from each other. Here's what I mean. Every business buys a number of inputs, performs value-adding activities on them and sells the results at a profit. In the final analysis, that's what every business is. The stock, on the other hand, is an ownership stake in the business that gets traded around in a market that aggregates the crowd's rapidly changing views about the future health of the business. It's also possible that the stock's movements relate to the crowd's view about "the market" in general, and have very little to do with what's going on at the company. So, in some sense, the stock is "doubly buffeted" by the crowds' rapidly changing views about a given company, and the crowd's rapidly changing views about the overall stock market, the overall economy, etc. This can be as tiresome as having a friend who either constantly brags, constantly repeats himself, or much worse, both. After all, if the stock's price is really only the present value of all future cash flows (it is), then it shouldn't bounce around in price so much. While this is tiresome, it's also potentially profitable, because these price movements have the potential to create a disconnect between market expectations and subsequent reality. In my experience, this is the only way to generate profits trading stocks: by determining the crowd's expectations about a given company's performance, spotting discrepancies between those assumptions and stock price, and placing a trade accordingly. I've also found it's the case that investors do better/less badly when they buy shares that are relatively cheap, because cheap shares correlate with low expectations. Excessively low expectations correlate with strong future gains. As my regulars know, I measure the relative cheapness of a stock in a few ways. For example, I like to look at the ratio of price to some measure of economic value, like earnings, sales, free cash, and the like. I like to see a company trading at a discount to both the overall market, and to its own history. Previously, I decided to continue to avoid the shares because they were trading at a price to free cash flow of ~24.5 times and sported a paltry dividend yield of about 1.6%. Zoom forward in time and the shares are much more expensive, and the dividend yield has barely budged higher, per the following: GNTX data by YCharts GNTX data by YCharts The fact that investors are paying more and getting basically the same yield is not a great sign in my view. It's enough to cause me to continue to eschew the shares. Before I get excited here, I need to see financial performance improve relative to 2019, and or for the shares to become much more attractively priced. Options Update My regulars know that I love to write deep out-of-the-money put options on decent companies because I think these create "win-win" trades. If the shares remain above the strike, I collect the premia. If the shares drop in price, I'll be obliged to buy, but will do so at a price that I find attractive. When it comes to Gentex, I previously did well, selling 10 December Gentex puts with a strike of $20 for $.70 each. These expired worthless, which boosted my overall return on this name nicely. It's time to look into this again. Is it possible to earn some money while we wait for the shares to fall to a more reasonable level?

Shareholder Returns

	GNTX	US Auto Components	US Market
7D	-2.9%	-2.4%	1.0%
1Y	-16.9%	-30.7%	-12.9%

Return vs Industry: GNTX exceeded the US Auto Components industry which returned -30.7% over the past year.

Return vs Market: GNTX underperformed the US Market which returned -12.8% over the past year.

Price Volatility

Is GNTX's price volatile compared to industry and market?
GNTX volatility
GNTX Average Weekly Movement	5.2%
Auto Components Industry Average Movement	8.2%
Market Average Movement	7.9%
10% most volatile stocks in US Market	17.1%
10% least volatile stocks in US Market	3.2%

Stable Share Price: GNTX is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 5% a week.

Volatility Over Time: GNTX's weekly volatility (5%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1974	4,998	Steve Downing	https://www.gentex.com

Gentex Corporation designs, develops, manufactures, markets, and supplies digital vision, connected car, dimmable glass, and fire protection products in the United States, Germany, Japan, Mexico, and internationally. It operates through Automotive Products and Other segments. The company offers automotive products, including interior and exterior electrochromic automatic-dimming rearview mirrors, automotive electronics, and non-automatic-dimming rearview mirrors for automotive passenger cars, light trucks, pick-up trucks, sport utility vehicles, and vans for original equipment manufacturers, automotive suppliers, and various aftermarket and accessory customers.

Gentex Fundamentals Summary

How do Gentex's earnings and revenue compare to its market cap?
GNTX fundamental statistics
Market Cap	US$6.44b
Earnings (TTM)	US$315.69m
Revenue (TTM)	US$1.75b

20.4x

P/E Ratio

3.7x

P/S Ratio

Is GNTX overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
GNTX income statement (TTM)
Revenue	US$1.75b
Cost of Revenue	US$1.16b
Gross Profit	US$593.59m
Other Expenses	US$277.90m
Earnings	US$315.69m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)	1.34
Gross Margin	33.90%
Net Profit Margin	18.03%
Debt/Equity Ratio	0%

How did GNTX perform over the long term?

See historical performance and comparison

Dividends

1.8%

Current Dividend Yield

35%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is GNTX undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

3/6

Valuation Score 3/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for GNTX?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for GNTX. This is calculated by dividing GNTX's market cap by their current preferred multiple.
What is GNTX's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	US$6.44b

GNTX key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	3.5x
Enterprise Value/EBITDA	13.3x
PEG Ratio	0.8x

Price to Earnings Ratio vs Peers

How does GNTX's PE Ratio compare to its peers?

GNTX PE Ratio vs Peers

The above table shows the PE ratio for GNTX vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	37.9x
ALV Autoliv	20.4x	32.2%	US$6.8b
LEA Lear	75.2x	43.0%	US$8.5b
VC Visteon	42.1x	36.0%	US$3.4b
BWA BorgWarner	14x	16.3%	US$9.0b
GNTX Gentex	20.4x	24.6%	US$6.4b

Price-To-Earnings vs Peers: GNTX is good value based on its Price-To-Earnings Ratio (20.4x) compared to the peer average (37.9x).

Price to Earnings Ratio vs Industry

How does GNTX's PE Ratio compare vs other companies in the US Auto Components Industry?

Price-To-Earnings vs Industry: GNTX is expensive based on its Price-To-Earnings Ratio (20.4x) compared to the US Auto Components industry average (17.2x)

Price to Earnings Ratio vs Fair Ratio

What is GNTX's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

GNTX PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	20.4x
Fair PE Ratio	14x

Price-To-Earnings vs Fair Ratio: GNTX is expensive based on its Price-To-Earnings Ratio (20.4x) compared to the estimated Fair Price-To-Earnings Ratio (14x).

Share Price vs Fair Value

What is the Fair Price of GNTX when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: GNTX ($27.39) is trading below our estimate of fair value ($60.8)

Significantly Below Fair Value: GNTX is trading below fair value by more than 20%.

Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is less than 20% higher than the current share price.

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Future Growth

How is Gentex forecast to perform in the next 1 to 3 years based on estimates from 10 analysts?

Future Growth Score

5/6

Future Growth Score 5/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

24.6%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: GNTX's forecast earnings growth (24.6% per year) is above the savings rate (1.9%).

Earnings vs Market: GNTX's earnings (24.6% per year) are forecast to grow faster than the US market (12.8% per year).

High Growth Earnings: GNTX's earnings are expected to grow significantly over the next 3 years.

Revenue vs Market: GNTX's revenue (10.7% per year) is forecast to grow faster than the US market (7.9% per year).

High Growth Revenue: GNTX's revenue (10.7% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: GNTX's Return on Equity is forecast to be high in 3 years time (24%)

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Past Performance

How has Gentex performed over the past 5 years?

Past Performance Score

1/6

Past Performance Score 1/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

-3.7%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: GNTX has high quality earnings.

Growing Profit Margin: GNTX's current net profit margins (18%) are lower than last year (23.7%).

Past Earnings Growth Analysis

Earnings Trend: GNTX's earnings have declined by 3.7% per year over the past 5 years.

Accelerating Growth: GNTX's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: GNTX had negative earnings growth (-30.4%) over the past year, making it difficult to compare to the Auto Components industry average (4.8%).

Return on Equity

High ROE: GNTX's Return on Equity (16.1%) is considered low.

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Financial Health

How is Gentex's financial position?

Financial Health Score

6/6

Financial Health Score 6/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: GNTX's short term assets ($991.9M) exceed its short term liabilities ($286.2M).

Long Term Liabilities: GNTX's short term assets ($991.9M) exceed its long term liabilities ($11.7M).

Debt to Equity History and Analysis

Debt Level: GNTX is debt free.

Reducing Debt: GNTX has no debt compared to 5 years ago when its debt to equity ratio was 0.5%.

Debt Coverage: GNTX has no debt, therefore it does not need to be covered by operating cash flow.

Interest Coverage: GNTX has no debt, therefore coverage of interest payments is not a concern.

Balance Sheet

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Dividend

What is Gentex current dividend yield, its reliability and sustainability?

Dividend Score

5/6

Dividend Score 5/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage

1.75%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: GNTX's dividend (1.75%) is higher than the bottom 25% of dividend payers in the US market (1.52%).

High Dividend: GNTX's dividend (1.75%) is low compared to the top 25% of dividend payers in the US market (4.09%).

Stability and Growth of Payments

Stable Dividend: GNTX's dividends per share have been stable in the past 10 years.

Growing Dividend: GNTX's dividend payments have increased over the past 10 years.

Earnings Payout to Shareholders

Earnings Coverage: With its reasonably low payout ratio (35.3%), GNTX's dividend payments are well covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its reasonable cash payout ratio (55.4%), GNTX's dividend payments are covered by cash flows.

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Management

How experienced are the management team and are they aligned to shareholders interests?

7.2yrs

Average management tenure

CEO

Steve Downing (44 yo)

5yrs

Tenure

US$3,642,695

Compensation

Mr. Steven R. Downing, also known as Steve, has been the Chief Executive Officer at Gentex Corporation since January 01, 2018 and has been its President since August 2017. He has been Director of Gentex Co...

CEO Compensation Analysis

Compensation vs Market: Steve's total compensation ($USD3.64M) is below average for companies of similar size in the US market ($USD8.35M).

Compensation vs Earnings: Steve's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: GNTX's management team is seasoned and experienced (7.2 years average tenure).

Board Members

Experienced Board: GNTX's board of directors are considered experienced (4.2 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: GNTX insiders have only sold shares in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/08/06 00:00
End of Day Share Price	2022/08/05 00:00
Earnings	2022/06/30
Annual Earnings	2021/12/31