<<Why do you think they will benefit from the industry trends? >>
Good question Running Bull. Lots of good companies out there in this sector that are cheap as Don has pointed out. Here's my take on FSII and why I still hold versus dumping for another equipment manufacturer -
First, the fundamentals are sound. The company is selling at a price to book ratio of 1.2 and a debt/equity ratio of 0.2 - essentially it has no debt. As in almost everything I buy I think the downside is somewhat limited at these prices (I guess we will see after the AMAT call tonight). FSII will not go bankrupt.
The company has good analyst coverage - eight follow. Analysts will help push demand for the stock once things start to look better - and they have 1 strong buy, 4 buys, and 3 holds on the company. For the most part I look at analysts as either (1) biased or (2) incompetent, but their support of a small or micro cap company is very helpful in getting it noticed - the number of publicly traded small caps has doubled in the last 7 years so lots of companies looking for attention.
The company is a small cap - $260 million - and the size may make it an attractive acquisition candidate, and if not smaller companies historically have outperformed, although not necessarily in technology and not necessarily lately.
The analysts have an estimated long term earnings growth rate estimate of 25.6% if I recall - about three times the earnings growth rate estimate of the S&P 500 - but then again remember these are just estimates - really guesses - by some who have not been very accurate in the past.
What struck me as unique to an extent, and why I initially bought into FSII, was that for a small company it appeared that they offered some diversity in the equipment they offered in the cleaning, deposition, and etching area - and if one area did not sell well another area would fill in the slack to some extent. The analyst reports also were very positive on the company's products - it has been a year or so since I've dug them out to look at so I can't recall all the gory details.
Another thing I was somewhat impressed with is that several customers and an industry organization recognized FSII as having high customer satisfaction levels- which is a vote of confidence for management and FSI products. If the customers are pleased, long term you should do OK, if not real well.
In any event there may be better looking undervalued companies in this sector today, but I'm going to stick around here. I know if I sell the stock will be selling for $25 a share within days of my transaction :).
Comments on this logic, or lack thereof, are welcome. I don't like to trade, but if I made a mistake I don't hesitate to pull the plug either. I like FSII still at these prices, as do the analysts, and pray that AMAT has good words for us tonight.
Best - Joe |
