Richardson Electronics has gotten torched over the last six months - since December 2024, its stock price has dropped 33.3% to $9.38 per share. This may have investors wondering how to approach the situation.
Is there a buying opportunity in Richardson Electronics, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think Richardson Electronics Will Underperform?
Even though the stock has become cheaper, we're swiping left on Richardson Electronics for now. Here are three reasons why RELL doesn't excite us and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Richardson Electronics grew its sales at a tepid 4.9% compounded annual growth rate. This fell short of our benchmark for the industrials sector. 
2. EPS Trending Down
Analyzing the change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Richardson Electronics’s full-year EPS dropped significantly 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, Richardson Electronics’s low margin of safety could leave its stock price susceptible to large downswings.
3. Breakeven Free Cash Flow Limits Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Richardson Electronics broke even from a free cash flow perspective over the last five years, giving the company limited opportunities to return capital to shareholders.
Final Judgment
Richardson Electronics doesn’t pass our quality test. Following the recent decline, the stock trades at 13.4× forward P/E (or $9.38 per share). This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are more exciting stocks to buy at the moment. Let us point you toward the Amazon and PayPal of Latin America.
Stocks We Like More Than Richardson Electronics
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.