Buy Rogers Corp.: Arms Dealer To Megatrends In 5G, ADAS, And HEVs/EVs

Jan. 17, 2020 12:28 PM ETRogers Corporation (ROG)WOLF, VICR, COHR, ERIC, TSLA, NOK, QCOM9 Comments
Christopher Hillary profile picture
Christopher Hillary


  • Rogers is a key supplier to communications infrastructure - 5G a large catalyst.
  • Rogers is a key supplier into other strong growth markets in auto safety (ADAS), hybrid and electric vehicles and the electronics that power the IoT.
  • Path to $10 in EPS in the medium term.

Rogers Corporation (NYSE:ROG) is something that is hard to find - a small cap arms dealer to 5G infrastructure and electric vehicle (EV) megatrends that already earns mid-teens operating margins, targets 7-10% organic growth and has the strength and optionality afforded by a net cash position. While the company’s 2020 goals are behind schedule, the business can still deliver on an impressive combination of growth and margin expansion to generate $10 earnings per share by 2022. Stocks with this set of drivers routinely command a multiple in the low-to-mid 20x range affording the stock material upside (50%+) from today’s $130 share price.

ROG is a value add manufacturer of high performance materials and components. While the company manufactures electronics products in three categories, it is easier to think about their two primary end markets - Advanced Connectivity and Advanced Mobility. These two markets are the fast growing pieces of the company and currently account for half of sales. The drivers in Advanced Connectivity are 5G wireless infrastructure and the Internet of Things while the growth of EV and advanced driver assist systems (ADAS) support Advanced Mobility. These are two of the most compelling structural growth trends in the markets today with both poised to accelerate in 2020 and beyond.

Source: Rogers Corporation

Roger’s goal for 2020 is $1.2BN in revenues and a 20% operating margin. As 2019 has developed, this goal looks aggressive. The primary example of this is in the 5G market. ROG is a supplier into the Huawei suppliers and the current state of the trade dispute with China has slowed 5G deployments and disrupted the supply chain. Since Huawei has been the leader in 5G base station deployments and other suppliers been slower to get to market[1], this has put pressure on ROG’s near-term growth rate. Similarly, the

This article was written by

Christopher Hillary profile picture
Mr. Hillary founded Roubaix Capital, LLC in May 2015 and serves as the firm’s Chief Executive Officer. From 2010 to present, he has served as portfolio manager of Roubaix Fund, L.P. Prior to founding Roubaix, Mr. Hillary was a founding partner and served as a senior analyst at Independence Capital Asset Partners, LLC since its inception in 2004 through its transition to Roubaix in 2015. From 2001 to 2004, Mr. Hillary was an analyst at Marsico Capital Management working for the Marsico International Opportunities Fund. Prior to Marsico, he worked for Morgan Stanley. Mr. Hillary is a graduate of Rutgers College and has a MBA from the University of Colorado.

Disclosure: I am/we are long ROG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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