Photronics, Inc. – Value Analysis (NASDAQ:PLAB) : August 17, 2017

Capitalcube gives Photronics, Inc. a score of 50.

Our analysis is based on comparing Photronics, Inc. with the following peers – Micron Technology, Inc., AXT, Inc., Axcelis Technologies, Inc., SunEdison, Inc., United Microelectronics Corp. Sponsored ADR, IKONICS Corporation and ASML Holding NV ADR (MU-US, AXTI-US, ACLS-US, SUNEQ-US, UMC-US, IKNX-US and ASML-US).

Investment Outlook

Photronics, Inc. has a fundamental score of 50 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative underperformance over the last year and the last month suggest a lagging position.
  • It trades at a lower Price/Book multiple (0.63) than its peer median (1.52).
  • The market expects faster earnings growth from PLAB-US than from its peers and also a turnaround in its current ROE.
  • PLAB-US has relatively low profit margins and median asset efficiency.
  • Changes in annual earnings (relative to peers) are better than the change in its revenues (relative to peers), implying the company is focused more on earnings.
  • Over the last five years, PLAB-US‘s return on assets has declined from about median to less than the median among its peers suggesting that the company’s historical competitiveness in operations is slipping away.
  • The company’s relatively low gross and pre-tax margins suggest a non-differentiated product portfolio and not much control on operating costs relative to peers.
  • Compared with the peers chosen, PLAB-US has had faster revenue growth in prior years and a current P/E ratio that suggests faster growth in the future suggesting superior growth expectations.
  • The company’s level of capital investment is relatively low and suggests it is milking the business.
  • PLAB-US has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

PLAB-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 12.53% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 15.44%), and a well-cushioned interest coverage level of 15.59x, PLAB-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • Of the 7 chosen peers for the company, only 6 of the stocks have an outstanding debt balance. Companies with no debt include AXTI-US.

PLAB-US has maintained its Quick & Able profile from the recent year-end.

  • PLAB-US‘s interest coverage is similar to last year’s high of 15.59x, which compares to a low of 3.97x in 2013.
  • Though its interest coverage has remained relatively stable at 15.59x compared to 2016, its peer median has increased to 6.10x from 3.72x during this period.
  • Interest coverage fell 2.38 points relative to peers.
  • PLAB-US‘s debt-EV is similar to last year’s low of 12.53%, which compares to the 2012 high of 62.20%.
  • Like the interest coverage trend, its debt-EV has also remained relatively stable at 12.53%, while its peer median has increased during this period (to 15.44% from 13.68%).
  • Relative to peers, debt-EV fell 1.76 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Micron Technology, Inc. 27.57 2.14 5.82 51.73
AXT, Inc. 0 8.16 No interest exp 999
Axcelis Technologies, Inc. 8.05 4.65 6.38 79.9
SunEdison, Inc. 85.45 1.13 -0.88 -6.35
United Microelectronics Corp. Sponsored ADR 53.31 1.37 3.32 53.81
IKONICS Corporation 18.35 6.21 -5.57 17.02
ASML Holding NV ADR 7.38 2.55 47.96 87.83
Photronics, Inc. 12.53 5.91 15.59 162.27
Peer Median 15.44 3.6 6.1 66.85
Best In Class 7.38 8.16 No interest exp 999

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Company Profile

Photronics, Inc. manufacturers and sells photomasks, which are high precision photographic quartz plates containing microscopic images of electronic circuits. Its photomasks are a key element in the manufacture of semiconductors and flat panel displays and are used as masters to transfer circuit patterns onto semiconductor wafers and flat panel substrates during the fabrication of integrated circuits and a variety of flat panel displays and to a lesser extent other types of electrical and optical components. The company was founded by Constantine S. Macricostas in 1969 and is headquartered in Brookfield, CT.


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