Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 4 stocks made the list for top value stocks in the Semiconductors & Semiconductor Equipment industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Semiconductors & Semiconductor Equipment Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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4 Undervalued Semiconductors & Semiconductor Equipment Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 4 undervalued stocks in the Semiconductors & Semiconductor Equipment industry for Thursday, October 03, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Semiconductors & Semiconductor Equipment industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Advantest Corporation’s Value Grade

Value Grade:

Advantest Corporation manufactures and sells semiconductors, component test system products, and mechatronics related products in Japan, the Americas, Europe, and Asia. The company operates through three segments: Semiconductor and Component Test System; Mechatronics Related Business; and Services, Support and Others. The Semiconductor and Component Test System segment provides customers with test system products for the semiconductor industry and the electronic parts industry, as well as offers test systems for SoC semiconductor devices, and test systems for memory semiconductors devices. The Mechatronics Related Business segment provides test handlers; mechatronic-applied products for handling semiconductor devices; and device interfaces, which serve as interfaces with the devices that are measured, as well as nano-technology related products. The Services, Support and Others segment provides test solutions of system level testing customer solutions for the semiconductor and modules, and support services. This segment is also involved in the sale of consumables and used products, and equipment lease and other businesses. It also engages in the research and development activities and provides maintenance and support services. The company was incorporated in 1946 and is headquartered in Tokyo, Japan.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Advantest Corporation has a Value Score of 80, which is considered to be undervalued.

When you look at Advantest Corporation’s price-to-sales ratio at 0.07 compared to the industry median at 3.07, this company has a lower price relative to revenue compared to its peers. This could make Advantest Corporation’s stock more attractive for value investors.

Advantest Corporation’s price-earnings ratio is 72.70 compared to the industry median at 29.35. This means it has a higher share price relative to earnings compared to its peers. This could make Advantest Corporation less attractive for value investors.

Now, let’s assess Advantest Corporation’s EV/EBITDA ratio, also known as enterprise multiple. At 33.5, when compared to the industry median of 19.1, the company may be considered overvalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Advantest Corporation’s shareholder yield is higher than its industry median ratio of (0.40%). Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Advantest Corporation’s price-to-book ratio is lower than its industry median ratio of 2.57. This could make Advantest Corporation more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Advantest Corporation’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Advantest Corporation’s price-to-free-cash-flow ratio is lower than its industry median ratio of 38.20. This could make Advantest Corporation more attractive because the lower P/FCF ratio indicates that Advantest Corporation is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Lasertec Corporation’s Value Grade

Value Grade:

Lasertec Corporation engages in the designing, manufacturing, and sale of inspection and measurement equipment in Japan and internationally. The company offers semiconductor related products, which includes mask related systems for extreme ultraviolet and deep ultraviolet solutions, and wafers inspection and review systems; and FPD photomask inspection systems. It also provides laser microscopes, electro-chemical reaction visualizing confocal, and coating thickness scanning system; and in-situ observation at ultra high temperature confocal scanning laser microscope. The company was formerly known as NJS Corporation and changed its name to Lasertec Corporation in 1986. Lasertec Corporation was founded in 1960 and is headquartered in Yokohama, Japan.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Lasertec Corporation has a Value Score of 94, which is considered to be undervalued.

Lasertec Corporation’s price-earnings ratio is 7.9 compared to the industry median at 29.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Lasertec Corporation more attractive for value investors.

Lasertec Corporation’s price-to-book ratio is higher than its peers. This could make Lasertec Corporation less attractive for value investors when compared to the industry median at 2.57.

You can read more about Lasertec Corporation’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

SCI Engineered Materials, Inc.’s Value Grade

Value Grade:

SCI Engineered Materials, Inc. engages in the manufacture and supply of materials for physical vapor deposition thin film applications in the United States. It offers ceramic targets, metal sputtering targets, and backing plates for use in semiconductors, thin film solar, flat panel displays, defense, aerospace, and photonics industries. The company’s materials are used to produce nano layers of metals and oxides for advanced material systems; and in applying decorative coatings for end uses, such as sink faucets to produce various electronic, photonic, and semiconductor products. It serves domestic and multi-national corporations, universities, and research institutions. The company was formerly known as Superconductive Components, Inc. and changed its name to SCI Engineered Materials, Inc. in 2007. SCI Engineered Materials, Inc. was incorporated in 1987 and is headquartered in Columbus, Ohio.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

SCI Engineered Materials, Inc. has a Value Score of 66, which is considered to be undervalued.

SCI Engineered Materials, Inc.’s price-earnings ratio is 10.4 compared to the industry median at 29.4. This means that it has a lower price relative to its earnings compared to its peers. This makes SCI Engineered Materials, Inc. more attractive for value investors.

SCI Engineered Materials, Inc.’s price-to-book ratio is higher than its peers. This could make SCI Engineered Materials, Inc. less attractive for value investors when compared to the industry median at 2.57.

You can read more about SCI Engineered Materials, Inc.’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

SPI Energy Co., Ltd.’s Value Grade

Value Grade:

SPI Energy Co., Ltd. provides photovoltaic and electric vehicle (EV) solutions for business, residential, government, and utility customers and investors in Australia, Japan, Italy, the United States, the United Kingdom, and Greece. The company offers engineering, procurement, and construction services to independent power developers and producers, and commercial and industrial companies. It also develops, owns, and operates solar projects that sell electricity to power companies and other electricity off-takers, including government-owned utility companies. In addition, the company sells self-assembled solar modules, forklifts, pre-development solar projects, component and charging stations, as well as offers shipping, delivery, engineering, and maintenance services. As of April, 2022, it owned and operated 17.51 megawatts of solar projects. The company is headquartered in Sacramento, California.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

SPI Energy Co., Ltd. has a Value Score of 69, which is considered to be undervalued.

SPI Energy Co., Ltd.’s price-to-book ratio is higher than its peers. This could make SPI Energy Co., Ltd. less attractive for value investors when compared to the industry median at 2.57.

You can read more about SPI Energy Co., Ltd.’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Semiconductors & Semiconductor Equipment Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Semiconductors & Semiconductor Equipment stocks as well as other industrys.

Choosing Which of the 4 Best Semiconductors & Semiconductor Equipment Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Advantest Corporation stock has a Value Grade of B.
• Lasertec Corporation stock has a Value Grade of A.
• SCI Engineered Materials, Inc. stock has a Value Grade of B.
• SPI Energy Co., Ltd. stock has a Value Grade of B.

Now that you have a bit more background about each of the 4 undervalued stocks in the Semiconductors & Semiconductor Equipment industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Semiconductors & Semiconductor Equipment Stocks

Want to learn more about Semiconductors & Semiconductor Equipment stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 4 Undervalued Semiconductors & Semiconductor Equipment Stocks for Thursday, October 03
• Mutual Funds Converting to ETFs for Tax Efficiency and Convenience
• Striking the Right Balance Between Growth and Value Stocks
• Why ACM Research Inc’s (ACMR) Stock Is Up 4.16%

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