Frankly, Katherine, there is enough information to judge.
Your hypothetical incorrectly describes the performance of DPMI, PLAB, and MASK regardless of your "disclaimer." Here are the actual results, from the relevant 10Ks and 10Qs and, in the case of the most recent MASK results, the recent press release.
MARKET SHARE (among the these three only, approximate, based on most recent 12 months)
MASK: 10%
PLAB: 40%
DPMI: 50%
Here MASK is clearly the small fry. So much for the market share.
NET INCOME as a % of REVENUE (most recent quarter)
MASK: 12.9%
PLAB: 10.1%
DPMI: 5.3:
MASK is clearly superior.
NET INCOME as a % of REVENUE (most recent three full fiscal years, 98-96)
MASK: 13.1%, 13.9%, 14.9%
PLAB: 13.0%, 13.1%, 14.8%
DPMI: 12.3%, 14.1%, 12.6%
MASK is equal to or better than PLAB and DPMI.
EARNINGS PER SHARE (most recent quarter, diluted, and most recent three full fiscal years)
MASK: $0.37 -- $1.25, $1.11, $1.12
PLAB: $0.24 -- $1.03, $0.87, $0.83
DPMI: $0.21 -- $2.15, $2.37, $2.50
MASK's trend is clearly superior.
RETURN ON AVERAGE EQUITY (approximate, based on fiscal year net income and average equity of current and previous years, 98-97)
MASK: 18%, 18%
PLAB: 15%, 15%
DPMI: 14%, 10%
MASK is clearly superior.
On a financial performance basis, MASK is superior to PLAB and DPMI in terms of the current quarter and in terms of the past three years.
Contrary to your use of the term "macroeconomic," it is not possible for a "macroeconomic" effect to apply to PLAB and DPMI but not MASK. Macroeconomics affects companies collectively (i.e., industries). Microeconomics affects companies individually. Thus, if we agree that MASK, PLAB, and DPMI are in the same industry, then they're affected by the same macroeconomics. It's the microeconomics that's different and it all appears to favor MASK.
In my opinion the reason MASK is currently undervalued relative to PLAB and DPMI has nothing to do with the financial factors summarized above. On those factors, MASK should be valued ahead of PLAB and DPMI. MASK is undervalued because 1) it is too small and too illiquid for the big institutions to take meaningful positions, and 2) it is not regarded as technologically equivalent to PLAB or DPMI on the leading and bleeding edge. With respect to size and liquidity, it is reasonable to apply a lower multiple to MASK, but not a multiple 40-50% of that applied to PLAB and DPMI. Something in the range of 80% would be about right given its superior performance. This would value the stock in the $20s, or more than PLAB. With respect to technology, let's be honest: very little activity takes place at .25 or below. For where the market is and where the market will be over the next few years MASK is perfectly positioned. When the market gets to OPC and phase-shift, MASK will be there. We'll see about DUV in a few years. In the meantime, MASK is making the revenue, the income, and the returns in a tough macroeconomic environment. PLAB and DPMI are fine companies, but MASK is the one that's undervalued and there's nothing hypothetical about it. |
