Rudolph Technologies Growing Into Expanding Markets, And Priced Fairly

Against a backdrop of generally weakening sentiment, Rudolph Technologies (RTEC) has been a bit of an outlier in the semiconductor equipment space. Up almost 30% over the last year, and over 20% year to date, Rudolph is solidly ahead of peers/rivals/comps like KLA Tencor (KLAC), Lam Research (LRCX), Applied Materials (NASDAQ:AMAT), Nova Measuring (NVMI), and SUSS Microtec (SMHN.XE). What makes that a little odd is that although the company has been steadily growing its addressable market, its revenue growth hasn't been all that outstanding on a peer-to-peer basis and its product exposures (RF, etc.) could be a vulnerability.

Rudolph has done a little better than I'd expected back in 2016, but compared to a stronger equipment environment than I'd expected the "net outperformance" hasn't been all that significant. Although I do like Rudolph's prospects for leveraging ongoing demand for advanced architectures and packaging, as well as its prospects to sell lithography stepper tools into the OLED space, the valuation seems pretty fair at a time when the overall sector is looking pretty wobbly.

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Rudolph Technologies Growing Into Expanding Markets, And Priced Fairly

Nanometrics Offers A Variation On A Familiar Theme

Nearly every semiconductor tool company is looking for its way to exploit the increasing complexity of semiconductors, as companies turn to 3D architectures and new packaging technologies to achieve new performance milestones. For Nanometrics (NASDAQ:NANO), its angle is exposure to growing process control needs and an increased number of inspection steps in the chip fabrication and packaging processes.

With solid (and growing) share in optical critical dimension tools, which are themselves gaining share in the metrology market, and solid positions with leading players in the memory and fab sectors, Nanometrics is looking forward to what ought to be double-digit revenue growth and peak EBITDA margins in the coming years. While competitors like KLA-Tencor (NASDAQ:KLAC) and Nova Measuring (NASDAQ:NVMI) aren't to be taken lightly, Nanometrics could still offer some upside provided that major chip companies continue to invest in new equipment to support more advanced process nodes.

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Nanometrics Offers A Variation On A Familiar Theme