Semiconductor packaging and test services provider Amkor Technology, Inc. (AMKR - Get Rating) in Tempe, Ariz., is currently trading 28.4% below its 52-week high of $29.50, which it hit on Sept. 16, 2021. However, the company’s recently reported fourth-quarter results have been impressive. Its board of directors also declared a quarterly cash dividend of $0.05 per common share, payable on March 21, 2022.

AMKR has provided guidance for first-quarter revenue of between $1.50 billion and $1.60 billion and earnings of between $0.45 and $0.65 per share. In addition, Giel Rutten, AMKR’s president and CEO said, “Our differentiated technology portfolio and deep customer and supplier relationships place us in a very strong market position, and we expect 2022 to be another year of growth.”

So, the stock’s near-term prospects look bright. Here is what I think could influence AMKR’s performance in the upcoming months:

Click here to checkout our Semiconductor Industry Report for 2022

Robust Financials

AMKR’s net sales increased 26% year-over-year to $1.72 billion in the fourth quarter, which ended Dec. 31, 2021. Its EBITDA grew 11.2% year-over-year to $398 million, while its net income came in at $217 million, representing a 70.9% year-over-year increase. Also, its EPS was  $0.88, up 69.2% year-over-year.

Favorable Analyst Estimates

For its fiscal year 2022, analysts expect AMKR’s EPS and revenue to grow 16.7% and 9.1%, respectively, year-over-year to $2.80 and $6.70 billion. In addition, its EPS is expected to grow 21.4% per annum over the next five years. And Wall Street analysts expect the stock to hit $28 in the near term, indicating a potential 32.6% upside.

Discounted Valuation

In terms of forward P/CF, AMKR’s 3.67x is 80% lower than the 18.40x industry average. Likewise, its forward P/S of 0.77x is 76.1% lower than the 3.22x industry average. Furthermore, the stock’s forward EV/S and EV/EBITDA of 0.82x and 3.69x, respectively, are significantly higher than the 3.30x and 12.99x industry averages.

High Profitability

In terms of trailing-12-month CAPEX/Sales, AMKR’s 12.70% is 463.4% higher than the 2.25% industry average. Likewise, its 10.48% trailing-12-month net income margin is 72.4% higher than the 6.08% industry average. Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 24.41%, 11.99%, and 10.65%, respectively, are higher than the 7.56%, 4.97%, and 3.69% industry averages.

POWR Ratings Show Promise

AMKR has an overall B rating, which equates to a Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. Among these categories, AMKR has an A grade for Value, in sync with its lower-than-industry valuation ratios.

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

AMKR is ranked #18 of 97 stocks in the A-rated Semiconductor & Wireless Chip industry.

Note that AMKR is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.

Bottom Line

AMKR reported impressive fiscal fourth-quarter results despite COVID-19-related disruptions and labor and supply shortages. It is well-positioned to benefit from the strong demand. So, we think it could be wise to buy the stock at the current discounted valuation.

How Does Amkor Technology (AMKR) Stack Up Against its Peers?

AMKR has an overall POWR Rating of B. But one could also check out these other stocks within the Semiconductor & Wireless Chip industry with an A (Strong Buy) rating: STMicroelectronics N.V. (STM - Get Rating), inTest Corporation (INTT - Get Rating), and Photronics, Inc. (PLAB - Get Rating).

Click here to checkout our Semiconductor Industry Report for 2022

AMKR shares were trading at $20.48 per share on Monday afternoon, down $0.63 (-2.98%). Year-to-date, AMKR has declined -17.21%, versus a -10.77% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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