Entegris Not Getting Its Due For A Differentiated Exposure To Semiconductor Markets

Electrochemical, filtration, and material handling company Entegris (ENTG) has had a rough year, as has competitor/peer Versum Materials (VSM), though investors in semiconductor equipment stocks like AEIS (AEIS) and VAT (OTCPK:VACNY) may not exactly be overflowing with sympathy (they've had it worse). Although Entegris is much more leveraged to wafer starts than equipment orders, investors seem to have bailed out ahead of this memory-led decline in equipment orders.

Although Entegris has some exposure to equipment trends and wafer starts may not be so strong next year, I think these shares are starting to look pretty interesting. Margins should continue to head higher (driving a better EV/revenue multiple), and I see meaningful room for FCF margin expansion as Entegris leverages ongoing growth in chip production and ever-increasing chip complexity. My biggest concern is perceptual, with the risk that investors look at the worsening outlook for equipment and high lead times and just bail on all things chip-related.

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Entegris Not Getting Its Due For A Differentiated Exposure To Semiconductor Markets