Veeco Instruments, Inc. (VECO) provides process equipment solutions that enable the production of high-tech microelectronic devices such as light-emitting diodes (LEDs), power electronics, hard disk drives, MEMS, wireless devices and semiconductors worldwide. The company serves customers in the HB-LED, solar, data storage, semiconductor, scientific research, and industrial markets.
SemiLEDS Corporation (LEDS) is a Taiwan-based company that develops, manufactures, and sells LED chips and components. The company’s products include entertainment LEDs that are used for general lighting applications, including street lights, commercial, industrial, system, and residential lighting.
The rising demand for electronics amid the remote working era coupled with integration of tech in virtually every industry has accelerated the demand for semiconductors worldwide. This has resulted in a global semiconductor shortage, causing multiple industries such as electric vehicles and 5G networking to lose out on billions annually. As a result, governments worldwide have been investing significantly to boost their semiconductor production. Therefore, the global semiconductor manufacturing equipment market is expected to grow at a CAGR of 3.9% to reach $53.20 billion by 2027.
While VECO lost marginally over the past month, LEDS surged 256.2%. In terms of their performance over the past nine months, LEDS is a clear winner with a 323.9% gain versus VECO’s 91.2% return. But, which of these stocks is a better buy now? Let’s find out.
Recent Financial Results
For the fiscal first quarter that ended March 31, 2021, VECO’s non-GAAP net sales increased 28% year-over-year to $133.71 million. The company’s non-GAAP gross profit increased 18.1% year-over-year to $55.44 million. Its non-GAAP operating income came in at $16.11 million, up 26.5% from the prior-year period. While its non-GAAP net income increased 16.4% year-over-year to $12.63 million, its non-GAAP EPS increased 13.6% year-over-year to $0.25. The company had cash and cash equivalents of $140.73 million, as of March 31, 2021.
For its fiscal year 2021 second quarter, which ended February 28, 2021, LEDS’ revenue decreased 21.5% year-over-year to $1.21 million. The company’s gross profit decreased 127.4% year-over-year to $241,000. Its loss from operations came in at $507,000, which represents a 29.3% rise from the prior-year period. Net loss stood at $255,000, compared to a net income of $348,000 in the prior year quarter. Its loss per share came in at $0.06, compared to an EPS of $0.08 in the year-ago period. The company had cash and cash equivalents of $2.09 million as of February 28, 2021.
Past Financial Performance
VECO’s revenue declined at a CAGR of 3.6% over the past three years. The company’s tangible book value has increased at a CAGR of 4.5% over the past three years.
In comparison, LEDS’ revenue and tangible book value fell at CAGRs of 15.9% and 38.7%, respectively, over the past three years.
VECO’s trailing-12-month revenue is 98.9 times what LEDS generates. VECO is also more profitable with a 12% EBITDA margin compared to LEDS’ negative value.
Also, VECO’s ROA and ROTC of 2% and 2.4% compare with LEDS’ negative values.
In terms of trailing-12-month Price/Sales, LEDS is currently trading at 11.67x, 388.3% higher than LEDS, which is currently trading at 2.39x. VECO’s trailing-12-month EV/Sales of 2.54x is significantly lower than LEDS’ 12.98x.
Also, in terms of trailing-12-month price-to-book, LEDS’ 35.35x is 1119% higher than VECO’s 2.90x.
Thus, VECO is more affordable here.
While LEDS has an overall grade of F, which translates into Strong Sell rating in our proprietary POWR Ratings system, VECO has an overall grade of B, which equates to Buy rating. The POWR Ratings are calculated considering 118 different factors, each weighted to an optimal degree.
VECO has an A grade for Growth. This is justified, as the company’s revenues increased 13.9% year-over-year. However, LEDS has a D grade for Growth. This is justified, as the company’s revenues declined 23.6% year-over-year.
VECO has a grade of C for Quality. This is justified, as the company’s gross profit margin of 41.95% is 13.5% lower than the industry average of 48.52%. LEDS, on the other hand, has a Quality Grade of F, in sync with the company’s negative ROE, ROA and ROTC values.
Out of 98 stocks in the B-rated Semiconductor & Wireless Chip industry, LEDS is ranked #96, while VECO is ranked #26.
Beyond what we’ve stated above, we have also grade both VECO and LEDS for Momentum, Stability, and Sentiment. Get all of LEDS grades here. Also, click here to see the additional POWR Ratings for VECO.
Given the current industry tailwinds, both VECO and LEDS have the potential to perform well in upcoming months. However, VECO’s impressive profitability, valuation, and financials make it a better buy here.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Semiconductor & Wireless Chip industry.
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VECO shares were trading at $23.90 per share on Tuesday morning, up $0.08 (+0.34%). Year-to-date, VECO has gained 37.67%, versus a 12.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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