Vishay Precision Group (VPG), known for its precision sensors, weighing solutions, and measurement systems, might be on the verge of a major breakthrough. While most analysts focus on the company's recovery in the latter half of 2024, driven by an improving macro environment and depleted inventory levels, a deeper dive into the Q1 2024 earnings call transcript reveals a potentially game-changing catalyst: eVTOL technology.

VPG's Measurement Systems segment, which houses their renowned DTS data acquisition systems, traditionally serves the automotive and defense sectors. Within automotive, their bread and butter has been crash dummy sensors. However, they've strategically expanded DTS into a new vertical: miniature data acquisition systems for non-traditional automotive applications, with eVTOL being a prime example.

While this eVTOL business currently contributes just a few million dollars, VPG anticipates a staggering 20% year-over-year growth. The Q1 transcript reveals a pivotal multi-million dollar order from a North American eVTOL developer. This order, coupled with VPG's established design wins at other key players conducting prototype testing, suggests a potentially explosive growth trajectory for this fledgling business.

Why This eVTOL Catalyst Might Be Flying Under the Radar:

Segment Opacity: VPG reports its Measurement Systems segment as a whole, obscuring the individual contributions of its steel-related businesses, KELK, and DTS. The transcript doesn't quantify the revenue breakdown, making it difficult to isolate the eVTOL impact. Future-Focused Guidance: While VPG forecasts overall Measurement Systems order growth, the emphasis is on the second half of 2024 and beyond. This long-term view might overshadow the immediate revenue boost from the multi-million dollar eVTOL order. Market Obscurity: The eVTOL market itself is still nascent, with many companies in the prototype and testing phases. Investors might not yet fully grasp the potential scale and rapid growth of this sector, potentially underestimating the magnitude of VPG's opportunity.

Hypothetical Scenario: The Potential Impact of eVTOL

Let's use a hypothetical scenario to illustrate the potential impact of the eVTOL business on VPG's revenue and profit: Assume the multi-million dollar eVTOL order contributes $3 million to Q2 2024 revenue. Applying the anticipated 20% year-over-year growth, this eVTOL business could generate approximately $7.8 million in annual revenue. If VPG maintains a conservative 56% gross margin for DTS, as seen in Q4 2023, this translates to a gross profit of $4.4 million from eVTOL.

While these figures are hypothetical, they underscore the potential for significant revenue and profit contributions from this underappreciated catalyst. As the eVTOL market matures and production ramps up, VPG's early mover advantage and design wins could translate into substantial growth for their DTS business, propelling the company beyond current analyst expectations.

VPG's Double Advantage in the eVTOL Market

Furthermore, consider this intriguing fact: VPG, through its Micro-Measurements brand, is a leading supplier of strain gauges, essential components for measuring stress and strain in materials. These gauges are critical for ensuring the structural integrity of aircraft, including eVTOLs. This positions VPG not just as a data acquisition provider but also as a crucial component supplier within the eVTOL ecosystem, further amplifying their growth potential.

Measurement Systems Orders Growth

The following chart illustrates the growth of VPG's Measurement Systems orders over the last two quarters, hinting at the potential impact of the eVTOL business.

While macroeconomic headwinds and inventory adjustments will undoubtedly shape VPG's performance in 2024, the eVTOL catalyst represents a "hidden" force that could significantly accelerate their growth trajectory. Investors who recognize this potential before it becomes widely apparent might be rewarded handsomely as VPG takes flight in the burgeoning eVTOL market.

"Fun Fact: The global eVTOL market is projected to reach a staggering $30.8 billion by 2030, growing at a compound annual growth rate (CAGR) of 24.1% from 2023 to 2030. VPG's early entry into this rapidly expanding sector positions them to capitalize on this significant growth opportunity. Source: https://www.globenewswire.com/en/news-release/2023/03/27/2634990/0/en/Global-Electric-Vertical-Take-Off-and-Landing-Aircraft-eVTOL-Market-to-Reach-30-8-Billion-by-2030-Allied-Market-Research.html"