At the beginning of March, Aptiv, a global industrial technology company, approved the spin-off of its electrical distribution systems business into a new publicly traded company, Versigent (NYSE: VGNT). When the new company started trading at the beginning of April, it's fair to say investors were underwhelmed, to say the least. There were hopes that the market would be willing to pay up to $31 a share, but it closed the day below $28 per share.
Yet in 2025, the firm reported $8.8 billion in revenue, $528 million in net income and $893 million in adjusted earnings before Ebitda. The shares are up slightly since the initial public offering, but it is still only valued at $2.5 billion, which looks cheap relative to earnings. And unlike most spin-offs, which are often loaded with debt to offload liabilities from the parent firm, Versigent's leverage is only 1.3 times Ebitda, roughly the market average and well below the market median of 2.6 times, according to S&P Global.
Why is Versigent so unloved?
Versigent is one of those businesses that often fly below investors' radars, but that play an integral role in the global economy. With 138,000 employees in 25 countries, the group has a huge footprint and is deeply embedded in the supply chains of major manufacturers in the vehicle, agricultural and energy-storage sectors.
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Officially, Versigent describes itself as “a global leader in the purposeful design and advanced manufacturing of low- and high-voltage electrical architectures”. In simple terms, this means the company designs, develops and manufactures components to help improve the efficiency of electrical systems in vehicles.
This is a highly specialised and labour-intensive process that the original equipment manufacturers have always been happy to outsource, giving Versigent a critical advantage. The group is already one of the top-three suppliers in every region in which it operates and its technology is embedded in one in every six vehicles produced globally (one in three for electric vehicles (EVs)). In addition, around 75% of sales are linked to full-service programmes, in which the firm becomes deeply embedded in electrical-architecture design early in the development process, tying the manufacturer and Versigent together through the design, development, testing and production phases.
In a world that's becoming increasingly dependent on electrical infrastructure and where vehicles are becoming smaller and smarter, the company's services are in demand. UBS has pencilled in revenue growth of 13% by the end of the decade, driven by rising demand for the high-voltage equipment it develops and sells to power network and battery-storage providers, and EV charging systems.
But growth isn't the story here; it's cash generation. Versigent will boast an Ebitda margin of 10.3% for 2026, according to UBS. The company has said it can drive 200 basis points of margin expansion by 2028, although UBS thinks 100 basis points is more likely (the base case). That would still be a near 10% increase on what is already a healthy level of cash generation.
Savings are expected to come from automation. At 80% of sales, manufacturing costs are the firm's largest overhead expense. Management has estimated that 30% of its workforce performs basic tasks, such as wire-cutting and stripping. In its two Chinese factories, these processes are mostly automated, and management wants to roll this out across the rest of its business. As a newly separated business, there are likely to be some additional costs in the short term as employees bed into new functions and the company fills positions previously overseen at the group level, but as an independent company Versigent should be able to identify and strip out costs faster than it would otherwise as part of a larger group.
Versigent is a cash cow
Versigent's appeal lies in its cash generation. UBS believes free cash-flow conversion on net income could hit 80% by the end of the decade. On top of that, analysts are only projecting “minimal capital spending” over this period (about $250 million per annum), so the majority of this should fall to the bottom line. For a company with an already healthy balance sheet, this implies that there will be a healthy amount of cash available to return to investors. Versigent's own projections suggest $1 billion of free cash flow over the two years to 2028 (UBS has pencilled in $830 million).
Cash returns could start imminently. Pre-spin-off, Versigent's management said it required only $400 million in cash for day-to-day liquidity, compared with about $700 million on the post-spin-off balance sheet. Coupled with its regular free cash-flow generation, Versigent could have somewhere in the region of $1.1 billionin extra cash in the next two and a half years to the end of 2028. Analysts at UBS have crunched the numbers on Versigent's potential and come up with some eye-catching figures. The firm's peers pay out around 23% of free cash flow as a dividend. At present, Versigent's average yield is about 2.2%. UBS estimates that if the company pays out 23% of free cash flow (about $170 million to the end of 2028), the shares could yield around 3%.
Assuming the company does not decide to go hunting for acquisitions, that would leave about $930 million for share repurchases, enough to buy back 42% of the group's current outstanding shares. Add that together and it seems as if Versigent has the potential to return about 44% of its current market value to shareholders by the end of 2028. If that isn't enough, the company is around 30% cheaper than its peer group valued by free cash-flow yield. Versigent appears to be somewhat of a hidden gem.
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