On October 30, 2023, Axcelis Technologies Inc (ACLS, Financial) recorded a daily loss of 8.53%, contributing to a three-month loss of 34.54%. Despite these losses, the company's Earnings Per Share (EPS) stands at a solid 6.21. The question that arises is: is Axcelis Technologies' stock modestly overvalued? This article presents an in-depth analysis of Axcelis Technologies' valuation to answer this critical question. Let's delve in.
Company Introduction
Axcelis Technologies Inc designs, manufactures, and services ion implantation and other processing equipment used in the fabrication of semiconductor chips. Additionally, the company provides aftermarket lifecycle products and services, including used tools, spare parts, equipment upgrades, maintenance services, and customer training. The majority of the company's revenue is derived from the Asia Pacific region.
As of October 30, 2023, Axcelis Technologies' stock price stands at $126.27, against a GF Value (Fair Value) of $100.49. This discrepancy suggests that the stock might be modestly overvalued. The following analysis provides a detailed examination of this valuation.
Understanding GF Value
The GF Value represents the current intrinsic value of a stock, calculated based on historical trading multiples, a GuruFocus adjustment factor based on the company's past performance, and future business performance estimates. The GF Value Line provides an overview of the fair trading value of the stock.
According to our valuation method, Axcelis Technologies appears to be modestly overvalued. The GF Value estimates the stock's fair value based on historical multiples, an internal adjustment based on past business growth, and future business performance estimates. If the stock's share price significantly deviates from the GF Value Line, it may indicate overvaluation or undervaluation, affecting future returns. Currently, Axcelis Technologies' market cap stands at $4.10 billion, suggesting modest overvaluation.
Given this overvaluation, the long-term return of Axcelis Technologies' stock is likely to be lower than its business growth.
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Financial Strength Analysis
Investing in companies with low financial strength could lead to permanent capital loss. Hence, it's crucial to review a company's financial strength before investing. Axcelis Technologies' cash-to-debt ratio of 9.88 ranks better than 70.21% of 903 companies in the Semiconductors industry, indicating a strong balance sheet.
Profitability and Growth
Investing in profitable companies carries less risk. Axcelis Technologies has been profitable for 8 of the past 10 years, demonstrating consistent profitability. The company's operating margin of 21.93% ranks better than 84.26% of 953 companies in the Semiconductors industry, indicating strong profitability.
Growth is a critical factor in a company's valuation. Axcelis Technologies' 3-year average annual revenue growth rate is 39.3%, ranking better than 90.85% of 874 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) provides a measure of its profitability. Over the past 12 months, Axcelis Technologies' ROIC was 38.12, while its WACC was 16.13, indicating value creation for shareholders.
Conclusion
In conclusion, Axcelis Technologies' stock appears to be modestly overvalued. The company boasts strong financial condition and profitability, with growth ranking better than 93.54% of companies in the Semiconductors industry. To learn more about Axcelis Technologies, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
