Don...
I continue to have a big problem making sense out of any
number associated with 'earnings' (PE, PEG, etc.) in the
equipment sector. In addition to the fact that so few
companies are currently reporting 'earnings' (only 7 of 36
stocks in my semi-equip universe - see below), the ability to
predict growth/future earnings is, IMO, virtually nil due to
the ongoing devastating lack of demand in the IC sector.
I remain an advocate of the price/sales ratio as a more
accurate and sensitive indicator of valuation. For example,
while less than 20% of equip. companies can generate a
current PE number, ALL companies have a p/s.
Below is a ranking of equipment stocks based on Yahoo's p/s
number.
Stock P/S PE
TGAL 0.62 n/a
WFR 0.84 n/a
SFAM 0.96 n/a
ATRM 1.07 n/a
FSII 1.15 n/a
ADEX 1.19 n/a
KLIC 1.31 n/a
EMKR 1.33 n/a
MTSN 1.35 n/a
GGNS 1.43 n/a
ASMI 1.57 154
PLAB 1.68 77
DPMI 1.69 n/a
VECO 1.80 n/a
BRKS 1.89 n/a
REAL 2.14 n/a
SMTL 2.17 n/a
LRCX 2.19 n/a
UTEK 3.11 n/a
ASYT 3.18 n/a
COHU 3.29 n/a
ATMI 3.86 n/a
ASML 4.08 25
TER 4.30 n/a
NANO 4.35 n/a
EGLS 4.75 n/a
LTXX 4.78 n/a
KLAC 4.93 32
CYMI 5.14 333
NVLS 5.19 83
CMOS 5.41 n/a
CREE 5.65 n/a
HELX 6.48 n/a
AMAT 6.71 2038
PHTN 9.71 n/a
IBIS 10.44 n/a
There is clearly a very wide dispersion of valuations in this
sector. However, the mean p/s for the group, 3.36, remains
far to high for this stage of this 'recovery'. In fact, the
average p/s of some of the largest-cap stocks (AMAT, NVLS,
KLAC, TER) is 5.28. This is stratospheric; the likelihood
that the valuations of these leading stocks will be brought
down over the next couple months is, IMO, very high…and this
process will drag the rest of the sector with it.
A major caveat here is that there is hardly any correlation
between your data on performance over the past 4 weeks and
p/s: while SFAM, the stock with the 3rd lowest p/s was the
best performer over the past month, TGAL, the stock with the
absolute lowest p/s was one of the worst performers. And
UTEK, the 2nd best stock performer, has a p/s (3.11) that's
neither high nor low relative to the group.
As usual, go figure.
Best regards,
Scott. |
