NVE CORP /NEW/ (NVEC) stock intrinsic value fair value estimate & owner earnings analysis

NVE Corporation designs and makes spintronic magnetic sensors and signal couplers at its own wafer fabrication plant in Eden Prairie, Minnesota. About 96% of revenue is product sales (sensors for medical implants and devices, industrial and defense equipment, and isolation couplers), sold through distributors in more than 75 countries and directly to large customers; the rest is contract research and MRAM licensing. It is an unusually profitable small manufacturer: gross margin was 79% and operating margin 60% in the year ended March 2026, it has no borrowings, and its share count has been flat for a decade at about 4.84 million. WHAT THE BUSINESS EARNS. We measure owner earnings as operating cash flow, with year-to-year swings in receivables, inventory and payables removed, less stock compensation and the maintenance portion of capital spending. All ten fiscal years (March 2017 to March 2026) were rebuilt on this one basis; earlier published figures were on a different basis and are not comparable. Per share they ran $2.80, $2.98, $3.12, $3.12, $2.49, $3.02, $4.64, $3.40, $2.72 and $3.18. Between $0.23 and $0.33 of each year's figure is after-tax interest on the company's bond portfolio. We take that interest out and add the portfolio at its value instead, so it is not counted twice. What remains is the operating business, with a ten-year median of $2.79 per share (about $13.5 million a year). We used all ten years because they contain a full cycle: the fiscal 2021 pandemic trough (revenue down 16% to $21.4 million), the fiscal 2023 spike ($38.3 million, which unwound over the next two years) and ordinary years in between. No year was excluded. Revenue was $28.3 million in fiscal 2017 and $26.3 million in fiscal 2026, so the business has not grown in a decade, and we credit no growth in any case. In the latest year operating owner earnings rose about 19%, from $2.46 to $2.92 per share; the cases start at or below that level, so no reversal of a slowdown is being assumed. Capital spending of $1.3 million in fiscal 2025 and $2.2 million in fiscal 2026 went into a production-equipment expansion that the company says is now complete and that it expects to fall sharply; we treated it as ordinary capital spending, which is conservative for those two years. WHAT IT OWNS AND OWES. At June 30, 2026 the company held about $41.0 million of investment-grade bonds (about $8.46 per share) plus $2.9 million of cash, which we treat as working float. It has no debt. Lease obligations are small and already run through operating costs, so they are not subtracted. In every case below the business owes nothing, so each case's value is the business value plus about $8.46 per share of bonds. BASE CASE, about $45.61 per share ($37.15 business plus $8.46 bonds). Operating owner earnings stay at $2.79 per share for 15 years and then erode 5% a year. The evidence: a ten-year record that held through the pandemic; sensors qualified into implanted medical devices that are costly to redesign; a supply agreement with Abbott Laboratories that has been in place since 2006 and amended twelve times (the current term runs to December 31, 2027); and roughly $3 million a year of research funded from the company's own cash. Beyond year 15 nothing we can point to supports continuing earnings, so they fade. Left out: new products (ultrahigh-sensitivity TMR sensors, chip-scale parts, MRAM for tamper protection), because none has yet shown up as revenue growth; and the most recent quarter. Revenue for the quarter ended June 30, 2026 was $11.0 million against $6.1 million a year earlier, and net income was $6.4 million against $3.6 million. That is one quarter against an unusually soft comparison, so it does not change the level; two or three more quarters at this pace would. Fiscal 2026 also included $1.07 million of advanced-manufacturing tax credits that the company expects to fall significantly, so we did not lean on the latest year's lower tax rate. BEAR CASE, about $31.24 per share ($22.78 business plus $8.46 bonds). Two named risks happen. First, the largest customer, 37% of fiscal 2026 revenue (the filing does not name it), cuts its volume by half from fiscal 2029. The Abbott agreement expires December 2027, and while the company says it has historically kept selling to such customers without formal agreements, it cannot promise renewal. That alone takes owner earnings to about $2.15 per share. Second, a downturn like fiscal 2018 to 2021, when revenue fell 28% from $29.9 million to $21.4 million, arrives in fiscal 2029 and 2030; we cut earnings about 31%, more than the 17% they fell last time, to $1.48 per share for two years, with partial recovery to $1.80 in fiscal 2031 and $2.15 from fiscal 2032. The first two years run at $2.45 and $2.30 (fiscal 2025 levels, then the first effect of the contract expiry). After year 10 earnings fade 8% a year. Because the company has no debt, this case has no refinancing consequence. BULL CASE, about $59.63 per share ($51.17 business plus $8.46 bonds). The company's own levers work: fiscal 2022 to 2024 already delivered three consecutive years averaging $3.43 per share of operating owner earnings; the expansion is finished; fiscal 2026 showed pricing power; and the Abbott agreement is renewed as it has been before. We hold $3.45 for 20 years, then fade 3% a year. We do not extrapolate the latest quarter's pace. HOW WE ARRIVED AT THE MARGIN-OF-SAFETY PRICE, $24.00. We are fairly sure of the earnings level: it is a ten-year median in a business with 79% gross margins, no debt and cash flow that has tracked profit closely. We are less sure of its steadiness. Revenue went -16%, +26%, +42%, -22% and -13% in consecutive years, and over a third of it depends on one customer. The worst plausible outcome is the bear case, or somewhat worse if the customer leaves entirely or the Asian foundry and packaging suppliers are disrupted, which no case models. The business would survive that: it has no debt and the bonds alone are worth about $8.46 per share. The two things we are most likely to be wrong about are customer retention after 2027 (losing half of the largest customer takes the shares to roughly $31 in the bear case) and whether the latest quarter is the new normal, which would make our estimate too low. The price assumes a holding period of three to five years. Over that period, the company has paid $1.00 per share each quarter ($4.00 a year), which is more than operating earnings because it also returns the bond portfolio; that is real cash to an owner but it shrinks the cushion under the price, so we do not count the dividend as earnings. At $24.00, about $8.46 is covered by bonds, leaving about $15.50 for a business that earns about $2.79 per share a year, an 18% yield on that cost. From that price the bear case implies roughly a low double-digit annual rate, and the base case implies a return well above 20% a year. A higher price would leave too little margin if the largest customer is lost. NOT RECONCILED. The filing does not name the 37% customer. Interest income on the bonds is separated from operating cash flow using disclosed bond premium and discount amortization; the split is approximate. Fiscal 2024 working-capital lines leave about $9,000 unreconciled, under 0.1% of operating cash flow.