Servotronics, Inc. (SVT) Bundle
Understanding Servotronics, Inc. (SVT) Revenue Streams
Understanding Servotronics, Inc.’s Revenue Streams
Revenue for the three-month period ended September 30, 2024, increased by approximately $848,000, or 7.3%, compared to the same period in 2023. This growth was driven by an increase in volume of approximately $467,000 and price increases of approximately $401,000, partially offset by an unfavorable product mix of approximately $(20,000).
Foreign sales were approximately $3,209,000 for the three-month period ended September 30, 2024, compared to $3,652,000 for the same period in 2023, a decrease of approximately $(443,000), or (12.1)%.
Revenue for the nine-month period ended September 30, 2024, increased by approximately $3,858,000, or 12.3%, compared to the same period in 2023. This was driven by an increase in volume of approximately $2,980,000 and price increases of approximately $1,019,000, partially offset by an unfavorable product mix of approximately $(140,000).
Foreign sales for the nine-month period were $8,968,000 for 2024 compared to $8,763,000 for 2023, representing a growth of approximately $205,000, or 2.3%.
Revenue Breakdown by Segments
The following table provides a breakdown of revenues by segments for the nine-month periods ended September 30, 2024, and 2023:
| Segment | Revenue 2024 (in thousands) | Revenue 2023 (in thousands) | Change (in thousands) | Percentage Change |
|---|---|---|---|---|
| Products | 30,149 | 27,291 | 2,858 | 10.5% |
| Services | 5,000 | 4,000 | 1,000 | 25.0% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth for the nine-month period ended September 30, 2024, reflects a significant improvement compared to the previous year:
- 2024 Revenue: $35,149,000
- 2023 Revenue: $31,291,000
- Revenue Growth: $3,858,000 or 12.3%
Significant Changes in Revenue Streams
The increase in revenue streams can be attributed to several factors:
- Increased production output to meet customer demand.
- Price adjustments implemented to counteract rising costs.
- Challenges in forecasting and supply chain management due to market volatility.
Gross profit for the nine-month period ended September 30, 2024, was approximately $7,066,000, reflecting an increase of approximately $2,027,000, or 40.2%, compared to $5,039,000 in 2023. This resulted in a gross margin of 20.1% in 2024 compared to 16.1% in 2023.
The revenue performance for the current year reflects the company's strategic focus on enhancing customer relationships and adapting to changing market conditions.
A Deep Dive into Servotronics, Inc. (SVT) Profitability
A Deep Dive into Servotronics, Inc. Profitability
Gross Profit: For the three-month period ended September 30, 2024, gross profit decreased by approximately $231,000, or 9.2%, resulting in a gross margin of 18.2% compared to 21.6% for the same period in 2023. For the nine-month period ended September 30, 2024, gross profit increased by approximately $2,027,000, or 40.2%, leading to a gross margin of 20.1% compared to 16.1% for the same period in 2023.
Operating Profit: Operating income for the nine-month period ended September 30, 2024, was approximately $102,000, an improvement of $2,726,000 compared to an operating loss of $(2,624,000) during the same period in 2023. However, for the three-month period ended September 30, 2024, the company reported an operating loss of approximately $(281,000), a decline of $(561,000) from operating income of $280,000 during the same period in 2023.
Net Profit Margin: For the three-month period ended September 30, 2024, the net loss was $(496,000), compared to a net loss of $(204,000) for the same period in 2023. For the nine-month period ended September 30, 2024, the net loss was $(323,000), improving from a net loss of $(11,252,000) for the same period in 2023.
Trends in Profitability Over Time
For the nine-month period ended September 30, 2024, revenues reached $35,149,000, representing a 12.3% increase compared to $31,291,000 for the same period in 2023. This growth in revenue contributed to the significant increase in gross profit.
| Period | Revenue ($) | Gross Profit ($) | Gross Margin (%) | Operating Income ($) | Net Income ($) |
|---|---|---|---|---|---|
| Q3 2024 | 12,430 | 2,268 | 18.2 | (281) | (496) |
| Q3 2023 | 11,582 | 2,499 | 21.6 | 280 | (204) |
| 9M 2024 | 35,149 | 7,066 | 20.1 | 102 | (323) |
| 9M 2023 | 31,291 | 5,039 | 16.1 | (2,624) | (11,252) |
Comparison of Profitability Ratios with Industry Averages
The company's gross margin of 20.1% for the nine-month period ended September 30, 2024, exceeds the industry average of 15.0%. However, its net loss margin indicates challenges in maintaining profitability compared to industry standards.
Analysis of Operational Efficiency
Cost Management: Selling, General and Administrative (SG&A) expenses for the nine-month period ended September 30, 2024, were approximately $6,394,000, a decrease of $1,269,000, or 16.6%, compared to $7,663,000 during the same period in 2023. SG&A as a percentage of revenue improved to 18.2% from 24.5%.
Gross Margin Trends: The improvement in gross profit and gross margin for the nine-month period was positively impacted by price increases and higher production volumes, despite challenges from unfavorable product mix and overhead costs.
Debt vs. Equity: How Servotronics, Inc. (SVT) Finances Its Growth
Debt vs. Equity: How Servotronics, Inc. Finances Its Growth
As of September 30, 2024, the company's total debt consists of approximately $3,169,000 outstanding under an asset-based line of credit, compared to $2,103,000 as of December 31, 2023 . The maximum revolving credit available is $7,000,000, with the balance classified as a current liability due to specific provisions in the credit facility .
The debt-to-equity ratio stands at approximately 0.13, calculated from total liabilities of $13,270,000 and total shareholders' equity of $24,393,000 as of September 30, 2024 . This ratio is significantly lower than the industry average of approximately 0.5, indicating a conservative approach to leveraging debt .
Recent debt issuances include the aforementioned line of credit established in 2023, which has an interest rate of 9.0% as of September 30, 2024 . The company has successfully met its financial covenants, which require maintaining a tangible net worth of at least $20,000,000 and working capital of no less than $10,000,000 .
In balancing debt financing and equity funding, the company has shown a preference for utilizing its credit facilities for short-term financing needs while maintaining a healthy equity base . The ongoing focus on improving cash flow from operations has allowed the company to minimize reliance on additional equity funding.
| Financial Metric | As of September 30, 2024 | As of December 31, 2023 | Industry Average |
|---|---|---|---|
| Total Debt | $3,169,000 | $2,103,000 | N/A |
| Total Equity | $24,393,000 | $24,494,000 | N/A |
| Debt-to-Equity Ratio | 0.13 | 0.09 | 0.5 |
| Maximum Revolving Credit | $7,000,000 | N/A | N/A |
| Interest Rate on Credit Facility | 9.0% | 9.5% | N/A |
| Tangible Net Worth Covenant | $20,000,000 | $20,000,000 | N/A |
| Working Capital Covenant | $10,000,000 | $10,000,000 | N/A |
Assessing Servotronics, Inc. (SVT) Liquidity
Assessing Servotronics, Inc. (SVT) Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated to be approximately 2.53 based on current assets of $21,845,000 and current liabilities of $8,633,000.
Quick Ratio: The quick ratio, which excludes inventory from current assets, is approximately 1.40 when considering quick assets of $14,468,000 against current liabilities of $8,633,000.
Working Capital Trends
Working capital has shown a positive trend, increasing from $20,795,000 in September 2023 to $21,845,000 in September 2024. This increase is primarily due to higher inventory levels supporting production output and revenue growth.
Cash Flow Statement Overview
| Cash Flow Activity | Nine Months Ended September 30, 2024 (in thousands) | Nine Months Ended September 30, 2023 (in thousands) |
|---|---|---|
| Net Cash from Operating Activities | $11 | $(4,908) |
| Net Cash from Investing Activities | $(933) | $(606) |
| Net Cash from Financing Activities | $1,045 | $1,663 |
| Net Cash from Discontinued Operations | $(172) | $347 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company has $196,000 in cash and restricted cash, down from $308,000 in September 2023. The liquidity position appears stable, supported by a credit facility with a borrowing base of $7,000,000, from which $3,169,000 is currently drawn. The interest rate on the credit facility is approximately 9.0% as of September 30, 2024.
The availability of the credit facility and the increase in working capital indicate that the company has adequate liquidity to support its operations in the near term, although it remains contingent on achieving expected operating results.
Is Servotronics, Inc. (SVT) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of the company involves evaluating its financial metrics to determine whether it is overvalued or undervalued. Key ratios such as price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) will be examined.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is calculated using the trailing twelve months (TTM) earnings. As of the latest data, the P/E ratio stands at N/A due to the company reporting a loss in the last quarter.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated by dividing the stock price by the book value per share. The book value per share is approximately $9.65, leading to a P/B ratio of approximately 1.04 based on a recent stock price of $10.05.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is a useful metric for valuing the company. The enterprise value is approximately $37 million with an EBITDA of approximately $1.02 million, resulting in an EV/EBITDA ratio of approximately 36.27.
Stock Price Trends
The stock price trends over the last 12 months have shown volatility. The stock opened at $8.00 and has fluctuated, reaching a high of $12.00 and a low of $7.50. The current stock price is approximately $10.05.
Dividend Yield and Payout Ratios
The company does not currently pay a dividend, resulting in a dividend yield of 0%. Given the recent losses, the payout ratio is also 0%.
Analyst Consensus on Stock Valuation
Analyst consensus indicates a hold rating on the stock, with a target price of approximately $10.50. This reflects a cautious outlook given the current financial performance.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | N/A |
| P/B Ratio | 1.04 |
| EV/EBITDA Ratio | 36.27 |
| Current Stock Price | $10.05 |
| 12-Month High | $12.00 |
| 12-Month Low | $7.50 |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Servotronics, Inc. (SVT)
Key Risks Facing Servotronics, Inc.
The financial health of Servotronics, Inc. is influenced by various internal and external risk factors that can impact its operations and profitability. This section will outline significant risks facing the company as of 2024.
Industry Competition
Servotronics operates in a highly competitive industry, particularly within the aerospace and defense sectors. Increased competition can lead to pricing pressures and reduced market share. In the nine-month period ended September 30, 2024, the company reported revenues of $35,149,000, reflecting a growth of 12.3% compared to the same period in 2023 . However, the competitive landscape remains a persistent risk.
Regulatory Changes
Changes in regulations, particularly in the aerospace industry, can have significant implications for operations. Compliance with new regulations may require additional expenditures. The company has previously faced legal settlement expenses amounting to $570,000 in the three-month period ended September 30, 2024 .
Market Conditions
The overall market conditions, including economic downturns or fluctuations in demand for aerospace products, pose risks to financial stability. The company has noted challenges due to supply chain disruptions and labor shortages, which could affect future revenues. For instance, foreign sales decreased by approximately $443,000, or (12.1%), in the three-month period ended September 30, 2024.
Operational Risks
Operational risks include challenges in maintaining production efficiency and managing costs. The company reported a gross profit margin of 20.1% for the nine-month period ended September 30, 2024, compared to 16.1% in the same period in 2023 . The decrease in gross profit of approximately $231,000, or (9.2%), during the three-month period indicates potential inefficiencies.
Financial Risks
Financial risks encompass liquidity concerns and reliance on debt financing. The company has total current liabilities of $8,633,000 and total liabilities of $13,270,000 as of September 30, 2024 . The reliance on a line of credit, with an outstanding balance of approximately $3,169,000, increases financial vulnerability .
Strategic Risks
Strategic risks arise from misalignment between production capabilities and market demand. The company reported an operating income of approximately $102,000 for the nine-month period ended September 30, 2024, improving from a loss of $(2,624,000) in the same period in 2023. However, the ongoing need to adjust to customer reforecasts poses a risk to profitability.
Mitigation Strategies
The company has implemented various strategies to mitigate risks, including cost containment efforts and improvements in production efficiency. Management emphasizes aligning production output with customer demand to navigate market volatility effectively. Additionally, maintaining a strong liquidity position is vital, as evidenced by a working capital of approximately $21,845,000 as of September 30, 2024 .
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Pricing pressures and reduced market share | Revenue growth of 12.3% in 2024 |
| Regulatory Changes | Compliance costs and legal settlements | Legal expenses of $570,000 in Q3 2024 |
| Market Conditions | Economic downturns affecting demand | Decrease in foreign sales by $443,000 |
| Operational Risks | Challenges in production efficiency | Gross profit margin of 20.1% in 2024 |
| Financial Risks | Liquidity concerns and debt reliance | Total liabilities of $13,270,000 |
| Strategic Risks | Misalignment of production and demand | Operating income improvement to $102,000 |
Future Growth Prospects for Servotronics, Inc. (SVT)
Future Growth Prospects for Servotronics, Inc.
Product Innovations: Servotronics is focusing on enhancing its product offerings, particularly in the aerospace and defense sectors. Revenue for the nine-month period ended September 30, 2024, increased by approximately $3,858,000, or 12.3%, compared to the same period in 2023. This growth was driven by an increase in volume of approximately $2,980,000 and price increases of approximately $1,019,000, partially offset by an unfavorable product mix of approximately $(140,000).
Market Expansions: The company is expanding its reach in foreign markets. Foreign sales for the nine-month period ended September 30, 2024, reached $8,968,000, compared to $8,763,000 for the same period in 2023, representing a growth of approximately $205,000, or 2.3%.
Acquisitions: Although specific acquisition details have not been disclosed, the company has indicated a strategic focus on enhancing operational capabilities which could include future acquisitions to bolster its market position.
Future Revenue Growth Projections
Looking ahead, analysts project continued revenue growth, driven by increasing demand in key sectors. The company has successfully navigated challenges in supply chain disruptions and is working to align production with customer demand forecasts for 2025.
| Period | Revenue ($) | Growth ($) | Growth (%) |
|---|---|---|---|
| Q3 2023 | 11,582 | - | - |
| Q3 2024 | 12,430 | 848 | 7.3% |
| 9M 2023 | 31,291 | - | - |
| 9M 2024 | 35,149 | 3,858 | 12.3% |
Strategic Initiatives and Partnerships
The company is actively exploring partnerships that enhance its innovation capabilities. Strategic initiatives include cost management and operating cash flow focus, which are critical to achieving profitability and shareholder value enhancement.
Competitive Advantages
Servotronics holds several competitive advantages that position it favorably for growth, including:
- Strong Customer Demand: The company continues to meet increased customer demand, particularly in the aerospace market.
- Improved Gross Margin: For the nine-month period ended September 30, 2024, gross margin improved to 20.1% from 16.1% in 2023, driven by price increases and higher production volumes.
- Cost Management: SG&A expenses decreased by $1,269,000, or 16.6%, for the nine-month period ended September 30, 2024, compared to $7,663,000 in 2023.
These factors collectively contribute to a robust outlook for growth and enhanced operational efficiency moving forward.
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Resources:
- Servotronics, Inc. (SVT) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Servotronics, Inc. (SVT)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Servotronics, Inc. (SVT)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.