The consumer price index came in at 7.7% in October compared to the year-ago value. Despite being below Wall Street’s estimates, inflation is still far more than the Federal Reserve’s 2% target. Amid consecutive rate hikes and rising recession fears, demand for the semiconductor and chip industry has plummeted.
However, the CHIPS Act allotted $52 billion for chip manufacturing, which should significantly boost the domestic semiconductor and chip sector.
In addition, the global semiconductor materials market is expected to grow at a CAGR of 3.3% from 2022 to 2028. Also, investors’ interest in semiconductor stocks is evident from the SPDR S&P Semiconductor ETF’s (XSD) 18.1% gains over the past month.
United Microelectronics Corporation (UMC)
Headquartered in Hsinchu City, Taiwan, UMC is a semiconductor wafer foundry operating in Taiwan, Singapore, China, Hong Kong, and globally. The company offers services for circuit design, mask tooling, wafer fabrication, and assembly and testing.
In terms of forward Price/Sales, UMC is currently trading at 2.07x, 17.2% lower than the industry average of 2.50x. Its forward EV/EBIT multiple of 4.45 is 71.9% lower than the industry average of 15.81.
UMC’s trailing-12-month EBIT margin of 36.21% is 446.8% higher than the 6.62% industry average. Its trailing-12-month EBITDA margin of 52.20% is 333.4% higher than the 12.05% industry average.
UMC’s operating revenues came in at $2.38 billion for the third quarter that ended September 30, 2022, up 34.9% year-over-year. Moreover, its net income came in at $861 million, up 57.6% year-over-year. Also, its EPS came in at $2.19, up 53.1% year-over-year.
Analysts expect UMC’s revenue to increase 18.4% year-over-year to $9.12 billion in 2022. Its EPS is expected to increase 43.4% year-over-year to $1.19 in 2022. Over the past month, the stock has gained 20.7% to close the last trading session at $7.53.
UMC’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall A rating indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
UMC has an A grade for Quality and a B for Value. In the Semiconductor & Wireless Chip industry, it is ranked #2 out of 92 stocks. Click here for the additional POWR Ratings for Stability, Growth, Momentum, and Sentiment for UMC.
Photronics, Inc. (PLAB)
PLAB and its subsidiaries produce and sell photomask goods and services in the US, Taiwan, Korea, Europe, China, and other countries. The company offers photomasks to manufacture integrated circuits and flat panel displays and to transfer circuit patterns onto semiconductor wafers, FDP substrates, and other electrical and optical components.
On August 30, 2022, Frank Lee, CEO, said, “We achieved our sixth consecutive quarter of record revenue due to strong end market demand, favorable pricing dynamics, and outstanding performance by the entire organization.”
In terms of forward Price/Sales, PLAB is currently trading at 1.41x, 43.5% lower than the industry average of 2.50x. Its forward EV/EBIT multiple of 5.06 is 68% lower than the industry average of 15.81.
PLAB’s trailing-12-month EBIT margin of 23.23% is 250.9% higher than the 6.62% industry average. Its trailing-12-month EBITDA margin of 33.58% is 178.8% higher than the 12.05% industry average.
PLAB’s total revenues came in at $219.95 million for the third quarter ended July 31, 2022, up 28.9% year-over-year. Moreover, its net income came in at $31.23 million, up 82.9% year-over-year. Also, its EPS came in at $0.51, up 82.1% year-over-year.
PLAB’s revenue is expected to increase 24.2% year-over-year to $824.29 million in 2022. Its EPS is expected to grow 114% year-over-year to $1.84 in 2022. It surpassed EPS estimates in all four trailing quarters. Over the past years, the stock has gained 35.6% to close the last trading session at $18.88.
PLAB has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B for Value, Quality, and Growth. It is ranked #4 in the same industry.
Beyond what is stated above, we’ve also rated PLAB for Sentiment, Stability, and Momentum. Get all PLAB ratings here.
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UMC shares were trading at $7.47 per share on Wednesday afternoon, down $0.06 (-0.80%). Year-to-date, UMC has declined -36.15%, versus a -14.40% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...
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