The global semiconductor industry is expected to expand at a CAGR of 10% between 2021 to 2026. The rising demand for semiconductors is a corollary to the increasing use of smartphones, data centers, consumer electronics, etc. thanks to COVID-19 pandemic-driven trends.

In addition to a continuing  increase in demand, a supply shortage is driving the prices of chips higher. This should continue to benefit semiconductor manufacturers until supply increases to meet the demand.

We think it advisable to invest in small-cap stocks in this industry now because the current low interest rate environment and rising Treasury yields bode well for small-cap stocks. Also, small-cap stocks typically have greater upside potential versus their large-cap counterparts.

Axcelis Technologies, Inc. (ACLS), Camtek Ltd. (CAMT), SMART Global Holdings, Inc. (SGH), and Veeco Instruments, Inc. (VECO) are working on next-generation products and we think their shares possess significant upside potential.

Click here to checkout our Semiconductor Industry Report for 2021

Axcelis Technologies, Inc. (ACLS)

ACLS develops, manufactures, and markets the  processing equipment required in the manufacture of semiconductors. The company has worldwide operations. ACLS’s stock has gained 109.5% over the past year to close yesterday’s trading session at $38.23.

The company  recently implemented the first shipment of its new Purion H200 SiC Power Series implanter. ACLS  has also started shipping its  Purion XEmax™ high energy evaluation system.

For the quarter ended December 31, 2020, the company’s revenue rose 14% compared to the same period last year. Its  gross profit increased approximately 18.1% during the same period.

ACLS is expected to see revenue growth of 6.3% for the quarter ended March 31and 12.2% in 2021. Its  EPS is estimated to grow 30.4% in 2021 and 20% per annum over the next five years.

ACLS’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

It has a grade of B for Momentum and Value. In the B-rated Semiconductor & Wireless Chip industry, it is ranked #41 of 99 stocks.

In total, we rate ACLS on eight different levels. Beyond what we’ve stated above, we have also  given ACLS grades for Growth, Quality, Sentiment, and Stability. Get all the ACLS ratings here.

Camtek Ltd. (CAMT)

CAMT develops, manufactures, and markets automated optical inspection (AOI) systems and functional ink technology products. The company operates in the printed circuit boards and microelectronics segments.

CAMT’s revenue is expected to increase 82.1% for the quarter ended March 31 and 31.5% in 2021. Its  EPS is estimated to increase 40.6% in 2021 and at a rate of 15% per annum over the next five years. CAMT has returned 233.9% over the past year to close yesterday’s trading session at $28.28.

CAMT  recently received a $9 million order for the inspection of Advance Interconnect Packaging from a leading OSAT.

For the quarter ended December 31,the company’s revenues rose 46% year-over-year. It  had strong operating cash flow of $8.3 million.

It’s no surprise that CAMT has an overall B rating, which equates to Buy in our POWR Ratings system. CAMT also has a B grade  for Momentum, Growth, Sentiment, and Quality. In the same industry, it is ranked #21 of 99 stocks.

Click here to see the additional POWR Ratings for CAMT (Value and Stability).

SMART Global Holdings, Inc. (SGH)

SGH develops, manufactures, and markets specialty memory solutions. The company has worldwide operations. SGH’s stock price has increased 82.9% over the past year and its last closing price was $43.93.

For the quarter ended November 27, 2020, SGH’s  revenue climbed 7.2% versus the same period last year. The company’s Adjusted ebitda  rose 25.4% during the same period.

SGH is expected to see 11%  revenue growth  for the quarter ended May 31, 2021 and 10.5% in 2021. The company’s EPS is estimated to grow 37.1% in 2021 and 21.5% per annum over the next five years.

SGH recently completed the acquisition of Cree LED’s product business unit. The unit’s specialty in lighting will complement SGH’s specialty in memory products.

SGH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B, which equates to Buy in our proprietary ratings system. SGH has a B grade  for Value. In the same industry, it is ranked #38 of 99 stocks.

Beyond what we’ve stated above we have also given SGH grades for Momentum, Growth, Sentiment, Quality, and Stability. Get all the SGH ratings here.

Veeco Instruments, Inc. (VECO)

VECO develops and manufactures of thin film equipment. The company has global operations.

VECO’s revenue is expected to increase 20.2% for the quarter ended March 31 and 16.6% in 2021. Its  EPS is estimated to increase 31.4% in 2021 and at a rate of 91% per annum over the next five years.

The company  recently announced its plans to expand its manufacturing capacity in its San Jose plant. The expanded capacity will help meet growing demand for advanced laser annealing technology.

For the quarter ended December 31, 2020, VECO  saw a 22% increase in revenue versus the same period last year. The company’s net loss was $0.1 million compared to $32.9 million in the same period last year. VECO’s stock has gained 103.4% over the past year to close yesterday’s trading session at $20.20.

It’s no surprise that VECO has an A  grade  for Growth, and B for Momentum and Value. In the same industry, it is ranked #42 of 99 stocks.

Click here to see the additional POWR Ratings for VECO (Sentiment, Quality, and Stability).

The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Click here to checkout our Semiconductor Industry Report for 2021

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ACLS shares were trading at $41.04 per share on Wednesday afternoon, up $2.81 (+7.35%). Year-to-date, ACLS has gained 40.93%, versus a 6.64% rise in the benchmark S&P 500 index during the same period.

About the Author: Aaryaman Aashind

Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks. More...

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