AEIS: 3 Small-Cap Semiconductor Stocks to Consider Adding to Your Portfolio?

The size of the global semiconductor industry is expected to increase at a CAGR of 4.7% between 2019 to 2027. A worldwide shortage of semiconductor chips has been created d by exponential demand generated by the lifestyle and work-structure effects of the COVID-19 pandemic. Semiconductor stocks have been driven to record highs over the last year.

As the world continues its growing embrace of on digital activities, many analysts don’t expect the supply of semiconductors to meet the high demand anytime soon. As such, semiconductor companies that can efficiently increase their manufacturing capacity to meet the demand will be the big beneficiaries.

The iShares PHLX Semiconductor ETF (SOXX), which is the largest ETF focused on semiconductor stocks, has gained 76.7% over the past year. While the entire semiconductor industry is expected to continue rallying, fundamentally sound small-cap stocks in this sector may witness higher growth versus their large-cap counterparts.

Advanced Energy Industries, Inc. (AEIS), Ultra Clean Holdings, Inc. (UCTT), and ChipMOS Technologies, Inc. (IMOS) are semiconductor companies that are improving their offerings and capitalizing on rising demand. So, we believe these stocks are solid bets now.

Click here to learn more about the semiconductor industry in 2021

Advanced Energy Industries, Inc. (AEIS)

AEIS offers products that are used in the manufacture of complex semiconductors. Its products include dry etch, strip, chemical and physical deposition, and more. AEIS’ stock has gained 72.8% over the past year to close yesterday’s trading session at $108.8.

AEIS recently expanded its flagship Paramount RF power generator group of products with the addition of Paramount HP 10013 power generator. And Steve Kelley will become the new CEO of AEIS with the retirement of Yuval Wasserman. The leadership change is expected to help deliver sustainable and profitable growth by the company.

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For the quarter ended December 31, 2020, the company’s net sales increased 9.5% year-over-year. AEIS’ gross profit increased 29.5% during the same period.

AEIS is expected to see a revenue growth of 2.4% for the quarter ended March 31, 2021 and 4.2% in 2021. Its EPS is estimated to grow 8.3% in 2022 and at a rate of 3.8% per annum over the next five years.

AEIS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

AEIS also has a grade of B for Growth, Value, and Momentum. In the B-rated Semiconductor & Wireless Chip industry, it is ranked #13 of 60 stocks.

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

Ultra Clean Holdings, Inc. (UCTT)

UCTT designs, develops, manufactures, and markets subsystems that are designed to be used in the semiconductor manufacturing process. The company has operations primarily in North America, Asia, Europe. UCTT has returned 125.3% over the past year and closed the last trading session at $49.2.

UCTT has entered an agreement to acquire Ham-let (Israel-Canada) Limited. The acquisition will expand UCTT’s semiconductor addressable market by $2 billion.

For the quarter ended December 31, 2020, the UCTT’s total revenue increased 29% versus the same period last year. The company’s gross profit increased 37.7% during the same period.

UCTT’s revenue is estimated to increase 21.8% in the quarter ended March 31, 2021 and 16.2% in 2021. The company’s EPS is expected to rise 24.3% in 2021 and 20% per annum over the next five years.

It’s no surprise that UCTT has an overall rating of B, which equates to Buy in our POWR Ratings system. UCTT has a B grade for Momentum, Value, and Growth. In the A-rated Semiconductor & Wireless Chip industry, it is ranked #45 out of 98 stocks.

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

ChipMOS Technologies, Inc. (IMOS)

IMOS provides test and assembly services to semiconductor manufacturers, integrated device manufacturers, and independent semiconductor foundries. The company has worldwide operations. IMOS’ stock price has increased 33.5% over the past year and its last closing price was $26.88.

The company’s revenue for January 2021 increased 24.9% year-over-year. The increase in revenue has been attributed to favorable demand and supply dynamics.

For the quarter ended September 30, 2020, IMOS’ revenue increased 5.3% versus the same period last year. The company’s revenue for the quarter represents a six-year high for a single quarter.

IMOS’ strong fundamentals are reflected in its POWR Ratings. The company has been accorded an overall rating of B, which equates to Buy. IMOS has an A grade for both Value and Stability, and a B grade for Momentum. In the 60-stock Semiconductor & Wireless Chip industry, it is ranked #8.

Beyond what we stated above we also have given IMOS grades for Quality, Sentiment and Growth. Get all the IMOS ratings here.

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

Click here to learn more about the semiconductor industry in 2021

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AEIS shares were trading at $104.71 per share on Thursday morning, down $4.09 (-3.76%). Year-to-date, AEIS has gained 8.08%, versus a 3.99% 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...