To: Mani1 who wrote (23108 ) 9/27/1999 2:05:00 PM From: Robert Douglas Read Replies (2) | Respond to
Mani,Cymer is a greatly managed company with a dominant market position. Probably will make around $1.50 next year and around $2.00 year after that. After that it is really unpredictable. I value them somewhere between $25 and $30. The average cyclical P/E valuation range for the semiconductor equipment industry varies from a cyclical trough of roughly 10X-15X forward trough EPS, to more than 30X forward EPS at the peak. Smaller-cap companies tend to have higher highs and lower lows. On the upside, small-cap, high-growth companies can get 35X-40X forward EPS estimates given their higher-than-average growth rates. It is important to remember that the cycle in this industry generally lasts approximately four to five years, from peak to peak or trough to trough. It is not a technology cycle, but an oversupply/undersupply cycle more typical of commodity markets. The semiconductor industry spends little time with supply and demand in equilibrium, but rather spends most of its time either building new capacity or using up excess capacity. Given the number of competitors, the pace of technology, the expense involved, and the potential profits and losses, combined with the cyclicality, the industry is either one of two extremes: tremendous acceleration or crushing downturn.
