The last year has been one of the best for semiconductor stocks because demand for them increased exponentially. Semiconductor chips play a vital role in the construction and use of advanced technologies that are helping several businesses navigate the healthcare crisis. Among other uses, chips are essential for running PCs, gaming consoles, mobile phones, electric vehicles (EVs), industrial machines and data centers.
Investors’ increased interest in the semiconductor industry amid the pandemic is evidenced by the SPDR S&P Semiconductor ETF’s (XSD) 92.7% returns over the past year versus the SPDR S&P 500 ETF’s (SPY) 46.4% gains over this period.
While demand is rising, a shortage of semiconductors fueled by pandemic interruptions is pushing prices up. With governments worldwide taking measures to increase the use of EVs, and with the increasing use of cloud computing, 5G, and AI, the demand for semiconductors should keep growing. According to WBOC, the worldwide market for semiconductor equipment is expected to grow at a CAGR of 6.9% over the next five years.
Given this backdrop, we think it is wise to bet on lesser-known semiconductor companies, such as Vishay Intertechnology, Inc. (VSH) and ChipMOS Technologies Inc. (IMOS). They have immense growth potential thanks to their consistent product innovations.
Vishay Intertechnology, Inc. (VSH)
Based in Malvern, Pa., VSH is a manufacturer and supplier of discrete semiconductors and passive electronic components. The company operates primarily through six segments—Metal Oxide Semiconductor Field Effect Transistors (MOSFETs), Diodes, Optoelectronic Components, Resistors, Inductors, and Capacitors. It serves various end-markets, including industrial, computing, automotive, consumer, telecommunications, power supplies, military and aerospace, and medical.
This month, VSH introduced the world’s best AEC-Q101 qualified p-channel -80 V TrenchFET MOSFET. Its increases power density and efficiency in automotive applications. The launch should help the company stay ahead of its competitors.
On February 24, VSH launched the industry’s first SMD Ceramic Safety Capacitors with Y1 Rating of 500 VAC and 1500 VDC that deliver industry-high capacitance to 4.7 nF, while offering high humidity robustness and reduced production costs. With the greater adoption of this product, the company should witness an increase in its revenue.
The company’s net revenue increased 9.4% year-over-year to $667.18 million in the fourth quarter, ended December 31, 2020. Its net earnings grew 169% year-over-year to $37.57 million. The company’s adjusted EPS was $0.28, up 115.4% year-over-year.
For the quarter ending June 30, 2021, analysts expect VSH’s EPS and revenue to increase 161.1% and 30.9% year-over-year, respectively. It surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 72.4% over the past year and closed yesterday’s trading session at $25.28.
VSH’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a B grade for Growth and Value. Within the B-rated Semiconductor & Wireless Chip industry, VSH is ranked #13 of 98 stocks. To see additional POWR Ratings for VSH (Stability, Sentiment, Quality, and Momentum), click here.
ChipMOS Technologies Inc. (IMOS)
Headquartered in Hsinchu, Taiwan, IMOS researches, develops, manufactures, and sells high integration and high precision integrated circuits (ICs), and related assembly and testing services. Its segments include testing and assembly for liquid crystal display and other flat panel display driver semiconductors, and bumping. The company’s products and services are applied in information products, personal computers, communication equipment, office automation and consumer electronics.
For its fiscal year 2021 first quarter, ended March 31, 2021, IMOS’ revenue came in at $227 million, which represents a 15.7% year-over-year increase. This performance was driven primarily by strong memory and DDIC demand, along with improvements in both volumes and pricing.
Analysts expect IMOS’s revenue to increase 35.1% year-over-year to 248.82 million for the quarter ending June 30, 2021. The stock has gained 75.9% over the past year and closed yesterday’s trading session at $33.84.
IMOS’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. It has an A grade for Value, and a B grade for Sentiment, Stability, and Momentum.
We have also graded IMOS for Growth and Quality. Click here to access all IMOS’s ratings. IMOS is ranked #3 in the same industry.
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VSH shares were trading at $25.45 per share on Wednesday morning, up $0.17 (+0.67%). Year-to-date, VSH has gained 23.36%, versus a 11.18% 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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