ACM Research (ACMR, Financial) has recently been in the spotlight, registering a daily gain of 2.84% and a 3-month gain of 42.35%. With an Earnings Per Share (EPS) (EPS) of 1.02, the question arises: Is the stock significantly undervalued? This article aims to answer this question by providing an in-depth analysis of ACM Research's valuation. Read on to discover if this stock could be a potential addition to your portfolio.
Introduction to ACM Research (ACMR, Financial)
ACM Research Inc is a US-based company engaged in developing, manufacturing, and selling single-wafer wet cleaning equipment. This equipment is used by semiconductor manufacturers to remove particles, contaminants, and other random defects to improve product yield in fabricating integrated circuits, or chips. At its current price of $18.62 per share, ACM Research has a market cap of $1.10 billion, showing signs of being significantly undervalued compared to its GF Value of $56.55.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on three factors: historical trading multiples, a GuruFocus adjustment factor based on the company's past returns and growth, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
ACM Research's stock shows every sign of being significantly undervalued based on the GF Value calculation. Because ACM Research is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
Assessing ACM Research's Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, a company's financial strength must be carefully reviewed before deciding to buy shares. ACM Research has a cash-to-debt ratio of 3.33, which ranks better than 58.08% of 904 companies in the Semiconductors industry. Based on this, GuruFocus ranks ACM Research's financial strength as 8 out of 10, suggesting a strong balance sheet.
Profitability and Growth of ACM Research
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. ACM Research has been profitable 7 over the past 10 years. Over the past twelve months, the company had a revenue of $461.10 million and Earnings Per Share (EPS) of $1.02. Its operating margin is 19%, which ranks better than 80.19% of 954 companies in the Semiconductors industry. Overall, the profitability of ACM Research is ranked 8 out of 10, which indicates strong profitability.
Growth is one of the most important factors in the valuation of a company. ACM Research's 3-year average revenue growth rate is better than 93.71% of 874 companies in the Semiconductors industry. ACM Research's 3-year average EBITDA growth rate is 47.2%, which ranks better than 78.48% of 776 companies in the Semiconductors industry.
ROIC vs WACC
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, ACM Research's return on invested capital is 9.78, and its cost of capital is 10.1.
Conclusion
In conclusion, the stock of ACM Research (ACMR, Financial) shows every sign of being significantly undervalued. The company's financial condition is strong, and its profitability is robust. Its growth ranks better than 78.48% of 776 companies in the Semiconductors industry. To learn more about ACM Research stock, you can check out its 30-Year Financials here.
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