As the semiconductor industry heats up again, this equipment maker is estimated to grow at an annual rate of 176.8% over the next five years.
Cohu, Inc. (COHU)
From The Prudent Speculator
Cohu is a global leader in test and handling equipment, thermal subsystems, interface solutions, vision inspection and MEMS test solutions supplying the semiconductor industry and its test subcontractors, and a leader in printed circuit board test.
In the first quarter, COHU reported supply chain impacts in some regions due to the coronavirus pandemic, yet the company’s broader 5G-related business continued to see strong bookings as manufacturing ramps up in advance of big infrastructure upgrades. Cohu expects to see growth from the build out of global 5G networks, while consumer and automotive spending may drop in the near-term due to the pandemic.
While the P/E ratio is unusually high (83 times 2020 earnings estimates) the semiconductor space is notoriously cyclical, and earnings are expected to rebound strongly in 2021 and 2022. Management has for the time being discontinued the dividend to prioritize debt repayment, but we think capital gain potential is high.
John Buckingham, The Prudent Speculator, www.theprudentspeculator.com, 877-817-4394, June 2020