Monday, May 30, 2016

Seeking Alpha: Rudolph Technologies Riding Powerful New Chip Trends

The semiconductor industry is a tough place to play, but the semiconductor equipment industry is even worse, as the cycles swing even higher and lower, and as the timing of orders is difficult to predict (and can have huge impacts on the stocks in the meantime). What's more, you're talking about an industry where the key customers are keenly focused on trying to improve their own free cash flow, leading to a "do more with less" philosophy with equipment than can pressure suppliers.

What's the best defense? A good offense, or in this case, compelling technology and products that offer end users real advantages in throughput, production costs, and/or total cost of lifetime ownership. Rudolph Technologies (NYSE:RTEC) is trying to bring new technology to areas like advanced packaging, inspection, and metrology and use it to leverage real growth in new packaging technologies and RF and MEMS production.

While I'm an owner of Ultratech (NASDAQ:UTEK), a Rudolph competitor, I do think Rudolph's valuation is interesting. Product acceptance/adoption, order timelines, underlying demand for chips, and competition are all real issues (and difficult to forecast in their own right), but I believe mid-single digit revenue growth over the long term and peak margins in the mid-to-high 20%'s can justify a fair value in the mid-to-high teens today, with upside into the $20s if things go well.

Read more here:
Rudolph Technologies Riding Powerful New Chip Trends

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