2023-08-06 09:51:19
From cars to televisions and washing machines to lightbulbs: there are numerous objects in private households alone that can now be networked with one another thanks to integrated chips in what is known as the “Internet of Things”. The world hungers for semiconductors, and the proliferation of artificial intelligence will only fuel this hunger. The more sensitive the area of application, the more serious it is if the chips fail due to errors.
To ensure that this does not happen, each semiconductor is tested to ensure it is working properly before it is used. If the chip production itself is already a billion-dollar business, the market for the so-called semiconductor test devices is even more so. This is also interesting for investors.
The companies Advantest and Teradyne have divided the market for semiconductor testers between themselves and act as a duopoly with a market share of around 95 percent. In the past fiscal year, Advantest brought net income of 130.4 billion yen, an increase of 49.4 percent. The return on equity is a remarkable 39.3 percent.
Founded in Tokyo in 1954, the company produces semiconductor test equipment and electronic measuring instruments. Other business areas are mechatronic systems, which handle the test peripherals, and the service area. Of the 560.2 billion yen in total sales, about 70 percent is accounted for by the semiconductor and component test systems. Earnings before interest, taxes, depreciation and amortization (Ebitda) reached 189.1 billion yen in the past fiscal year.
CEO wants to enable cutting-edge technologies
It is also interesting to look at the return on sales. Thanks to the unusual market constellation, this reached a remarkable 30 percent in the past financial year. The company is a buy recommendation for nine Bloomberg analysts. 10 analysts advise at least holding the shares.
The market for semiconductor test systems is growing at least at the same rate as the semiconductor market itself. According to a study by Deloitte, the total market for semiconductors is expected to double between 2019 and 2027 to an annual market volume of almost 800 billion dollars. Since the test systems are upstream technologies, an investment is associated with a lower risk than, for example, buying Intel or Nvidia shares.
Of course, companies like Advantest also benefit from megatrends such as digitization, autonomous driving, artificial intelligence or electromobility, all of which increasingly require more and better chips.
CEO Yoshiaki Yoshida’s goal of “enabling cutting-edge technologies” requires the company to constantly adapt to new developments in the semiconductor industry. In order to keep up with the rapid and increasingly complex development, Advantest has repeatedly taken over companies in a targeted manner in recent years. In this way, attempts were made to gain expertise in new areas. The Italian company CREA, which specializes in test systems for power semiconductors, was recently added.
Market value of over 26 billion dollars
The Japanese group with its 6,544 employees currently has a market capitalization of the equivalent of $26.7 billion. The equity ratio is solid at 61.4 percent. Given the industry’s growth prospects and Advantest’s market position, a price-to-earnings ratio of 28 seems reasonable. In addition to the current price, the analysts’ earnings estimates are also included in the calculation, mostly for the earnings of the next twelve months. The share price hit an all-time high of $157.07 on July 18 and is currently around $135.
Achim Matzke Published/Updated: , Recommendations: 2 Christoph Scherbaum Published/Updated: , Recommendations: 15 Archibald Preuschat Published/Updated: , Recommendations: 5
The fact that the company has been paying dividends reliably for years is also pleasing. Most recently, that was the equivalent of $0.95 per share. Currently, 75.3 percent of all company shares are in free float. According to Bloomberg, the main shareholder is Bank Nomura with 12.3 percent.
#Advantest #stock #interesting #option #investors