Since the onset of the COVID-19 pandemic, supply chain bottlenecks have been a major hindrance for the semiconductor industry. The global chip shortage has been further exacerbated by increasing sanctions on Russia in response to its invasion of Ukraine. According to Pat Gelsinger, CEO of Intel, the semiconductor chip shortage will now drift into 2024. The primary reason is the unavailability of key manufacturing tools acting as a barrier to expanding the capacity levels required to meet the heightened demand.
Nevertheless, the growing consumption of consumer electronics and use of advanced technologies are expected to propel the industry’s growth. The semiconductor market is projected to reach $893.10 billion in 2029, growing at a 9.2% CAGR. Furthermore, the Semiconductor Industry Association (SIA) has urged Congress to work expeditiously to reach an agreement on the bill that allocates $52 billion to the CHIPS Act and provides an investment tax credit for domestic semiconductor manufacturing and design.
Given this backdrop, we think it could be wise to bet on quality semiconductor stocks ASE Technology Holding Co., Ltd. (ASX), Axcelis Technologies, Inc. (ACLS), ROHM Co., Ltd. (ROHCY), and Advanced Energy Industries, Inc. (AEIS), which are each currently trading at discounts to their peers.
Click here to checkout our Semiconductor Industry Report for 2022
ASE Technology Holding Co., Ltd. (ASX)
Headquartered in Kaohsiung, Taiwan, ASX provides a range of semiconductor packaging and testing and electronic manufacturing services worldwide. It offers packaging services, including flip-chip ball grid array (BGA), flip chip-scale package (CSP), advanced-scale packages, quad flat packages, low profile, thin quad flat packages, bump chip carriers, and other related services.
In terms of forward Price/Earnings, ASX is currently trading at 7.38x, which is 68.8% lower than the 23.63x industry average. Also, in terms of its forward Price/Sales, the stock is currently trading at 0.64x, which is 78.9% lower than the 3.05x industry average.
ASX’s net revenue increased 20.9% year-over-year to NT$144.39 billion ($4.89 billion) for the first quarter, ending March 31, 2022. Its operating income increased 47.7% from its year-ago value to NT$16.11 billion ($545.59 million), while its net income grew 52.3% to NT$12.91 billion ($437.03 million). Its EPS increased 52.1% year-over-year to NT$2.92.
The $0.21 consensus EPS estimate for the second quarter ended June 30, 2022, represents 31.1% year-over-year growth. Analysts expect its revenue to increase 12.1% year-over-year to $5.08 billion for the second quarter, ending June 30, 2022.
ASX’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
The stock also has an A grade for Value. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked #31 of 95 stocks.
To see additional POWR Ratings for Growth, Stability, Quality, Sentiment, and Momentum for ASX, click here.
Axcelis Technologies, Inc. (ACLS)
ACLS in Beverly, Mass., designs, manufactures, and services ion implantation and other processing equipment used to fabric semiconductor chips in the United States, Europe, and Asia. The company provides high energy, high current, and medium current implanters for several application requirements.
In terms of forward Price/Earnings, ACLS is currently trading at 13.57x, which is 42.6% lower than the 23.63x industry average. Also, in terms of its forward Price/Sales, the stock is currently trading at 2.21x, which is 27.3% lower than the 3.05x industry average.
During the fourth quarter, ending Dec.31, 2021, ACLS’ total revenue increased 68.3% year-over-year to $205.68 million. The income from operations grew 231% from its year-ago value to $46.58 million, while its net income improved 143.6% from its prior-year quarter to $35.75 million. The company’s EPS rose 144.2% year-over-year to $1.05.
Analysts expect ACLS’ revenue to increase 45.4% year-over-year to $193.12 million in the first quarter (ending March 31, 2022). The company’s EPS is expected to grow 101% year-over-year to $0.97 in the first quarter, ending March 31, 2022. In addition, it has an impressive earnings history, as it surpassed the consensus EPS estimate in all the trailing four quarters.
The stock has gained 34.9% in price over the past year and 45.3% over the past nine months.
ACLS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. ACLS is also rated an A grade for Growth and a B for Value and Sentiment. Within the Semiconductor & Wireless Chip industry, it is ranked #8.
In total, we rate ACLS on eight distinct levels. To see additional POWR Ratings for Momentum, Quality, and Stability for ACLS, click here.
ROHM Co., Ltd. (ROHCY)
Headquartered in Kyoto, Japan, ROHCY manufactures and sells electronic components worldwide. ICs, Discrete Semiconductor Devices, and Modules are the three operational segments. The company offers ICs that comprise memory, amplifiers and linear, power management, clocks and timers, switches and multiplexers, logic, data converters, sensors and MEMS, display drivers, motor/actuator drivers, and interfaces, communication and speech synthesis LSI, audio and video, and microcontrollers.
In terms of forward EV/Sales, ROHCY is currently trading at 1.36x, which is 54.2% lower than the 2.96x industry average. Also, in terms of its forward EV/EBIT, the stock is currently trading at 8.62x, which is 44.1% lower than the 15.41x industry average.
For the nine months ended Dec.31, 2021, ROHCY’s net sales increased 28.3% year-over-year to ¥338.19 billion ($2.60 billion). Its operating profit grew 129.7% from its year-ago value to ¥56.20 billion ($431.62 million), while its profit increased 156.1% from its prior-year quarter to ¥48.42 billion ($371.84 million). The company’s EPS rose 156.5% year-over-year to ¥493.37.
Analysts expect ROHCY’s revenue to increase 24.5% year-over-year to $3.47 billion for the year ending March 31, 2022.
It is no surprise that ROHCY has an overall B rating, which equates to Buy in our POWR Ratings system. It has an A grade for Stability and a B for Growth and Value. In the Semiconductor & Wireless Chip industry, it is ranked #18.
Click here to see the additional POWR Ratings for ROHCY (Momentum, Stability, Sentiment, and Quality).
Advanced Energy Industries, Inc. (AEIS)
AEIS in Fort Collins, Colo., designs, manufactures, sells, and supports precision power conversion, measurement, and control solutions worldwide. It offers plasma power solutions, including direct current (DC), pulsed DC, low-frequency alternating current, high voltage, radio frequency (RF) power supplies, and RF power supplies.
AEIS recently announced a comprehensive RF power delivery solution that unites advanced digitally-controlled power supplies with an accurate digital impedance matching network. The ALTA platform is designed for thin-film industrial applications that ensure versatile, reliable, and repeatable control that improves process stability and provides best-in-class yield.
Last month, it announced the completion of the earlier announced acquisition of SL Power Electronics Corporation from Steel Partners Holdings L.P. (SPLP). The acquisition delivers complementary products to Advanced Energy’s medical power offerings and widens its presence in several advanced industrial markets. “The addition of SL Power expands our offerings for industrial and medical applications,” said Steve Kelley, president, and CEO of Advanced Energy.
In terms of forward EV/EBIT, AEIS is currently trading at 12.64x, which is 18% lower than the 15.41x industry average. Also, in terms of its forward Price/Sales, the stock is currently trading at 1.87x, which is 38.7% lower than the 3.05x industry average.
AEIS’ net sales increased 7% year-over-year to $396.93 million for the fourth quarter, ended Dec. 31, 2021. Its operating income amounted to $42.21 million, while its net income attributable to AEIS came in at $39.66 million. The company’s EPS stood at $1.05 over the period.
Analysts expect AEIS’ revenue to increase 2.5% year-over-year to $360.57 million in the first quarter (ending March 31, 2022). The company’s EPS is expected to grow 55.7% year-over-year to $1.39 in the third quarter, ending Sept. 2022. In addition, it has an impressive earnings history; it surpassed the consensus EPS estimate in three of the trailing four quarters.
AEIS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. AEIS is also rated a B for Value. Within the Semiconductor & Wireless Chip industry, it is ranked #32.
In total, we rate AEIS on eight distinct levels. To see additional POWR Ratings for Momentum, Quality, Sentiment, Growth, and Stability for AEIS, click here.
Click here to checkout our Semiconductor Industry Report for 2022
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REVISED: 2023 Stock Market Outlook (includes top 7 picks)
ASX shares were trading at $6.60 per share on Tuesday morning, up $0.06 (+0.92%). Year-to-date, ASX has declined -15.49%, versus a -12.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing. More...
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