While the broader market has struggled with the S&P 500 down 13.8% since October 2024, Vicor has surged ahead as its stock price has climbed by 5.8% to $43.76 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now the time to buy Vicor, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
We’re glad investors have benefited from the price increase, but we're sitting this one out for now. Here are three reasons why there are better opportunities than VICR and a stock we'd rather own.
Why Is Vicor Not Exciting?
Founded by a researcher at the Massachusetts Institute of Technology, Vicor (NASDAQ: VICR) provides electrical power conversion and delivery products for a range of industries.
1. Long-Term Revenue Growth Disappoints
Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Vicor’s sales grew at a mediocre 6.4% compounded annual growth rate over the last five years. This was below our standard for the industrials sector. 
2. EPS Took a Dip Over the Last Two Years
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Sadly for Vicor, its EPS and revenue declined by 5.9% and 5.1% annually over the last two years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Vicor’s low margin of safety could leave its stock price susceptible to large downswings.
3. New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Vicor’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
Vicor isn’t a terrible business, but it isn’t one of our picks. With its shares beating the market recently, the stock trades at 40.7× forward price-to-earnings (or $43.76 per share). This valuation tells us a lot of optimism is priced in - we think there are better opportunities elsewhere. We’d suggest looking at one of our all-time favorite software stocks.
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