How can a stock be dirt cheap after being up more than 130% over the past year? It doesn’t happen often, but this is the case with this microcap gem. It also has wonderful growth metrics and seems to have much bigger upside. The stock is actually down 20% since the start of the year, so it is not overbought by any stretch. Say hello to Amtech Systems (ASYS).
The company engages in the design, assembly, sale, and installation of capital equipment and related consumables used in the manufacture of wafers, primarily for the solar and semiconductor industries. It operates in two segments, Solar and Semiconductor Equipment, and Polishing Supplies.
One thing I love about this stock is its powerful earnings beats. It has exceeded earnings estimates by an average margin of 51% over the past four quarters. Back in May, it reported stellar earnings of 77 cents per share for its fiscal second-quarter, which beat the estimate by 26 cents, or 51%. Revenues grew 14% sequentially. Additionally, management raised full-year guidance to 100% revenue growth over last year.
J.S. Whang, Chief Executive Officer of Amtech, commented, “Our record revenue and profit for the second quarter further demonstrate our technology leadership in high efficiency solar diffusion and our operational capability to manage and service this high-end growth market. During the quarter we acquired a controlling interest in a China-based solar ion implant technology company, demonstrating our commitment to technology leadership in meeting the ever increasing demand for higher solar cell efficiency.â€
The stock is trading at just over 8x current-year estimates. This is amazingly low for a company that is growing earnings in the 30% range. Additionally, the stock has a hearty ROE of 23.6%, no debt at all, and a price/sales ratio below 1x. This is a microcap stock, so it will be volatile, but these valuations provide a strong margin of safety.
I’m a bit puzzled by the stock’s poor performance so far in 2011, but its solar operations is probably the culprit. I think this is a great time to snap up the shares while they are slightly out of favor due to the aversion to anything solar-related in the market. As I’ve mentioned above, the company’s business is booming and earnings are powering ahead. Given the valuations and debt-free balance sheet, I think the stock is worth at least $30.
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