NVE Corporation $NVEC

The thesis

NVE Corporation, of Eden Prairie, Minnesota, makes spintronic sensors and couplers: small chips that sense magnetic fields or pass data between electronic systems (10-K, May 2026). Its custom sensors go into medical devices, and its catalog sensors and couplers into factory automation and power conversion. Our case is that the September quarter was a timing problem with one customer, not a change in the business, and that the balance sheet gives holders time to find out.

The evidence

One soft quarter after a big one. Revenue in the quarter to 30 September fell 8% to $5.8M (results release, Oct 2026). The company put the drop down to one customer rescheduling orders, which it said was due to a temporary change in that customer's inventory requirements, and lower defense sales (10-Q, Oct 2026). Operating income fell 12% to $3.2M, as costs also rose with director stock option grants (release and 10-Q). The June quarter had been $11.0M, against $6.1M a year earlier (10-Q, Jul 2026), so the six months to September were still up 35% at $16.9M, with operating income up 41% to $10.5M (release).

Margins held. Gross margin was 78% in the September quarter, against 78% a year earlier, and 80.2% for the half, and operating income was 55% of revenue in the quarter (release).

A clean balance sheet. NVE ended September with $44.4M of cash and marketable securities, no debt and $1.9M of total liabilities (release).

A large dividend. The board declared another $1.00 quarterly dividend, payable 30 November to holders of record on 2 November (release). Operating cash flow in the half was $11.1M, against $9.7M of dividends paid (10-Q).

What the market is missing

The shares closed at $103.07 on 21 October and $68.36 on 22 October, down 34%, and $82.37 on 28 October, still 20% below the 21 October close. At that close NVE is worth $399M on 4.8M shares, the cash and securities are about 11% of that, the dividend is about 4.9% a year, and the shares trade at about 22.3x the last four quarters' net income of $17.9M. We read the drop as the market pricing one customer's timing as if it were lost business, while the half's numbers and the margins say otherwise.

The risks

The dividend runs ahead of earnings: in the year to March 2026 the company paid $19.3M of dividends against $15.2M of net income (10-K), partly from maturing securities (10-Q), and in the half it paid $9.7M against $9.6M of net income (10-Q). The former CEO, Daniel Baker, who retired on 6 August and became chairman (8-K, Aug 2026), sold 48,371 shares between 27 July and 8 September at $101 to $121.50, leaving 17,932 held directly (Form 4s, Jul to Sep 2026). Directors and officers together owned about 2.1% in June, options included (proxy, Jun 2026). One customer was 37% of revenue in the year to March 2026 (10-K), defense sales swing with government buying, and the company gave no date for the rescheduled orders. The September quarter's net income fell only 4%, against 12% for operating income, helped by a tax rate of 14% against 20% (10-Q). Revenue is small, about $30.7M over the last four quarters, so one order can move a quarter.

What would change our mind

A December quarter with revenue down again on a year earlier and no sign of the rescheduled orders; the large customer's share of revenue falling sharply; gross margin moving well below the high 70s; or a dividend cut or a dividend paid by running down the securities faster than the business earns.