Despite its daily loss of 5.29% and a three-month decline of 0.56%, Axcelis Technologies Inc (ACLS, Financial) has an impressive Earnings Per Share (EPS) (EPS) of 6.21. However, the question remains: is the stock significantly overvalued? This article delves into the intricate valuation analysis of Axcelis Technologies, providing a comprehensive understanding of its financial health and future prospects. We encourage you to read on for an informed investment decision.
A Snapshot of Axcelis Technologies
Axcelis Technologies Inc designs, manufactures, and services ion implantation and other processing equipment used in the fabrication of semiconductor chips. In addition, the company offers aftermarket lifecycle products and services, including used tools, spare parts, equipment upgrades, maintenance services, and customer training. With a significant presence in North America, Asia Pacific, and Europe, Axcelis Technologies derives key revenue from the Asia Pacific region. Despite its current stock price of $169.42, the GF Value, an estimation of fair value, is only $98.61, suggesting a possible overvaluation.
Understanding GF Value
The GF Value is an exclusive measure of a stock's intrinsic value, calculated considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line represents the stock's ideal fair trading value. 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.
According to GuruFocus Value calculation, Axcelis Technologies (ACLS, Financial) is believed to be significantly overvalued. Given its current price of $169.42 per share and the market cap of $5.60 billion, the future return of Axcelis Technologies stock is likely to be much lower than its future business growth due to its significant overvaluation.
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Financial Strength of Axcelis Technologies
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. It is important to carefully review the financial strength of a company before deciding whether to buy its stock. Axcelis Technologies has a cash-to-debt ratio of 9.88, which is better than 70.22% of 900 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, especially those with consistent profitability over the long term, is generally less risky. Axcelis Technologies has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $1 billion and an EPS of $6.21. Its operating margin is 21.93%, ranking better than 84.53% of 944 companies in the Semiconductors industry. Overall, the profitability of Axcelis Technologies is strong, ranked 8 out of 10.
One of the most important factors in the valuation of a company is growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. Axcelis Technologies has an average annual revenue growth of 39.3%, ranking better than 90.91% of 869 companies in the Semiconductors industry. Its 3-year average EBITDA growth is 87.5%, ranking better than 93.65% of 772 companies in the Semiconductors industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The 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 exceeds the WACC, the company is likely creating value for its shareholders. Over the past 12 months, Axcelis Technologies's ROIC is 38.11 while its WACC came in at 15.57.
Conclusion
In conclusion, Axcelis Technologies (ACLS, Financial) stock appears to be significantly overvalued. The company's financial condition is strong, and its profitability is robust. Its growth ranks better than 93.65% of 772 companies in the Semiconductors industry. For more about Axcelis Technologies stock, you can check out its 30-Year Financials here.
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