As of September 07, 2023, Axcelis Technologies Inc (ACLS, Financial) has experienced a daily loss of -6.89% and a 3-month gain of 4.72%. With an Earnings Per Share (EPS) of 6.21, the question arises: is the stock significantly overvalued? This article provides a comprehensive valuation analysis of Axcelis Technologies (ACLS). Read on for a deep dive into the company's financials, profitability, and growth.
About Axcelis Technologies
Axcelis Technologies Inc is a prominent player in the semiconductor industry. The company designs, manufactures, and services ion implantation and other processing equipment used in the fabrication of semiconductor chips. It also offers aftermarket lifecycle products and services, including used tools, spare parts, equipment upgrades, maintenance services, and customer training. Axcelis Technologies has a strong presence in North America, the Asia Pacific, and Europe, with the Asia Pacific being its key revenue generator.
Despite a current price of $177.88 per share and a market cap of $5.80 billion, the GF Value of Axcelis Technologies stands at $98.27, indicating that the stock appears to be significantly overvalued.
Understanding the GF Value
The GF Value is an exclusive measure of a stock's intrinsic value, based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line represents the fair trading value of the stock. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
For Axcelis Technologies, the stock appears to be significantly overvalued according to the GF Value calculation. As a result, the long-term return of its stock is likely to be much lower than its future business growth.
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Axcelis Technologies' Financial Strength
Investing in companies with poor financial strength can result in a higher risk of permanent loss of capital. Therefore, it's crucial to review a company's financial strength before deciding to buy its stock. A great starting point for understanding a company's financial strength is looking at the cash-to-debt ratio and interest coverage. Axcelis Technologies has a cash-to-debt ratio of 9.88, which ranks better than 70.06% of 895 companies in the Semiconductors industry. GuruFocus ranks the overall financial strength of Axcelis Technologies at 9 out of 10, indicating strong financial health.
Profitability and Growth of Axcelis Technologies
Investing in profitable companies carries less risk, especially if the companies have demonstrated consistent profitability over the long term. A company with high profit margins offers better performance potential than a company with low profit margins. Axcelis Technologies, with its Earnings Per Share (EPS) of $6.21 and revenues of $1 billion over the past 12 months, has been profitable 8 years over the past 10 years. Its operating margin of 21.93% is better than 84.65% of 938 companies in the Semiconductors industry. GuruFocus ranks Axcelis Technologies's profitability as strong.
Growth is an important factor in the valuation of a company. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Axcelis Technologies is 39.3%, which ranks better than 90.96% of 863 companies in the Semiconductors industry. The 3-year average EBITDA growth is 87.5%, which ranks better than 93.6% of 766 companies in the Semiconductors industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another method to evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Axcelis Technologies's ROIC was 38.11, while its WACC came in at 15.59.
Conclusion
In conclusion, despite strong financial condition and profitability, the stock of Axcelis Technologies appears to be significantly overvalued. The company's growth ranks better than 93.6% of 766 companies in the Semiconductors industry. To learn more about Axcelis Technologies stock, you can check out its 30-Year Financials here.
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