Despite significant setbacks in the past year, the future of the semiconductor industry looks bright. We also think quality chip stocks Analog Devices (ADI), Camtek (CAMT) and inTEST (INTT) could be worth buying given government initiatives. Continue reading.
Despite the short-term slump, the long-term growth prospects for the semiconductor industry remain good. While semiconductor sales declined in the first quarter of 2023, sales fell increased by 0.3% in March 2023 compared to February 2023the first month-on-month increase in a year, giving optimism for a recovery.
So, investors might want to take a look at high-quality Analog Devices, Inc. chip stocks.ADI), Camtek Ltd. (CAMT) and inTEST Corporation (INT).
Governments around the world are investing heavily in increasing self-sufficiency in the semiconductor and electronics supply chain. The Biden-Harris administration made the announcement first CHIPS for America scholarship Opportunity to revitalize the American semiconductor industry.
In addition, the Biden administration proposed a new proposal 25% tax credit for investments for semiconductor production in the USA. The global semiconductor market is expected to grow by one year 13.1% CAGR until 2032.
Investor interest in chip stocks is evident in the VanEck Vectors Semiconductor ETFs (SMH) 20% return over the past six months.
Let’s dive deeper into the fundamentals of the above stocks.
Analog Devices, Inc. (ADI)
ADI designs, manufactures, tests and markets integrated circuits (ICs), software and subsystems that utilize analog, mixed-signal and digital signal processing technologies.
In forward price-to-book terms, the ADI is 2.62, 29.8% below the industry average of 3.74. Additionally, ADI’s expected EV/EBIT of 15.89x is 9.1% below the industry average of 17.47x.
ADI’s trailing 12-month ROTA is 4.57%, well above the industry average of 0.26%. At 44.88%, ROCE for the last 12 months is well above the industry average of 0.71%.
ADI revenue increased 21.1% year over year to $3.25 billion for the fiscal first quarter ended January 28, 2023. Adjusted operating income increased 35.1% year over year to $1.66 billion. Besides, it is EPS rose 41.8% year-on-year to $2.75.
Consensus estimate of revenue of $12.72 billion for the fiscal year ended October 2023 represents a year-over-year increase of 5.9%. Earnings per share are expected to increase by 12.6% over the same period. year-over-year to $10.78. It beat EPS estimates in all four of the most recent quarters.
Shares of ADI are up 17.8% over the past year to close the last trading session at $191.31.
ADIs POWR ratings reflect this promising outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR ratings evaluate stocks based on 118 different factors, each with its own weighting.
ADI also has a B grade for Momentum, Sentiment and Quality. It is ranked 25th out of 90 stocks Semiconductor and wireless chip Industry. Click here for the additional POWR ratings for value, stability and growth for ADI.
camtek ltd (CAMT)
Headquartered in Migdal HaEmek, Israel, CAMT designs, manufactures and sells inspection and measurement equipment. The company serves various segments of the semiconductor industry and sells its products in Asia Pacific, the United States and Europe.
CAMT’s expected EV/EBIT multiple of 13.48 is 28.3% below the industry average of 18.79. Its forward non-GAAP P/E multiple of 16.64 is 20.6% below the industry average of 20.95.
CAMT’s trailing 12-month ROCE is 21.92%, well above the industry average of 0.72%. The ROTA for the trailing 12 months is 11.53%, well above the industry average of 0.31%.
Total working capital of CAMT for the period ended March 31, 2023 was $561.57 million compared to $556.96 million for the period ended December 31, 2022. Additionally, current liabilities were $74.45 million compared to $88.50 million for the period ended March 31, 2023 for the same period.
Analysts expect CAMT revenue to grow 10.8% year over year to $323.53 million in 2024. Earnings per share are projected to rise 10.5% to $1.86 in 2024. EPS estimates have been beaten in all four of the last four quarters. The stock is up 18.9% over the past six months and closed its last trading session at $27.96.
It’s no surprise that CAMT has an overall rating of B, which equates to a buy in our POWR rating system. It has an A grade for dynamics and a B grade for stability and quality. It ranks 27th in the same industry.
Beyond the above, we also rated CAMT for sentiment, value, and growth. Get all CAMT ratings Here.
inTEST Corporation (INT)
INTT provides test and process solutions for use in manufacturing and testing in the automotive, defense/aerospace, industrial, life sciences, security and semiconductor markets worldwide. The Company operates through three segments: Electronic Testing; environmental technologies; and process technologies.
On April 18, 2023, INTT announced that its wholly owned subsidiary inTEST Thermal Solutions has become a distributor for Stellar Scientific (“Stellar”), a research and development focused equipment provider to the scientific community.
Stellar Scientific and inTEST Thermal Solutions have partnered to offer their customers a wide range of biomedical ultra-low temperature (ULT) freezers from inTEST North Sciences. Importantly, the agreement expands market opportunities for North Sciences products by leveraging Stellar’s GSA contract to supply US government agencies.
INTT’s forward EV/sales multiple of 1.84 is 33.3% below the industry average of 2.75. Its expected price-to-sales multiple of 1.79 is 32.3% below the industry average of 2.65.
INTT’s trailing 12-month ROCE is 17.19%, well above the industry average of 0.72%. The ROTA for the trailing 12 months is 9.43%, well above the industry average of 0.31%.
INTT’s revenue was $31.92 million for the fiscal first quarter ended March 31, 2023, a year-over-year increase of 32.5%. In addition, non-GAAP EBITDA increased 126.1% year over year to $4.83 million. Non-GAAP net income and earnings per share were $3.27 million and $0.29, respectively, up 158.2% and 141.7% year over year.
Street expects INTT revenue to grow 10.9% year over year to $129.61 million in 2023. Earnings per share are projected to rise 17.2% year over year to $1.16 in 2023. EPS estimates have been beaten in three of the last four quarters. Over the past year, the stock is up 206.1% to close the last trading session at $21.52.
INTT’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It ranks 26th in the same industry. It has an A grade for dynamism and a B grade for growth. To view more INTT ratings for Value, Stability, Sentiment, and Quality, click Here.
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ADI shares traded at $189.85 per share Tuesday morning, down $1.46 (-0.76%). Year-to-date, FDI is up 16.28%, while the benchmark S&P 500 index is up 9.69% over the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management and financial regulation issues which led her to pursue a career as an investment analyst. With a master’s degree in economics, she aims to make complex financial issues understandable for individual investors and to help them make the right investment decisions.
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