Profit From Technology Outsourcing

As I write this, the Street is holding its breath. Earnings season started yesterday. Who will be the Q3 winners? How will the market react? What will guidance look like?

It’s make or break time for a lot of value stocks.

We’ve found a new stock you’ll want to put on your radar. This company is growing revenue and has surprisingly strong earnings. Unfortunately the stock was sold off in the recent market downdraft.

This is a stock that mistakenly found its way to the bargain bin. Let’s take a look before the market realizes the price tag is wrong.

QUICK FACTS
Ticker                                       UCTT
Industry                                    Semiconductor – Specialized
Recent Price                           $4.54
Market Cap                              $103.1 m
Shares Outstanding                22.8 m
Average Volume                      64,329
Dividend Yield                          N/A
Website                                   http://www.uct.com/

COMPANY DESCRIPTION

As you know, semiconductor manufacturing is very complicated. It’s not a product that you can simply manufacture at home in your garage. It takes cutting edge technology, millions of dollars of equipment, clean room facilities, and lots of engineering experience.

Most semiconductor manufacturing facilities are built on the back of very advanced pieces of equipment.

The equipment is so specialized, that individual companies are now focused on developing only distinct processes.

And that’s where Ultra Clean Holdings (UCTT) comes in.

They design and build subsystems for chemical and gas delivery in semiconductor manufacturing equipment. Different types of systems supply gasses and or chemicals as needed.

Best of all, they work hand in hand with their clients from the R&D stage of development all the way to the end product.

FINANCIALS

UCTT’s revenue was up 26% year over year in Q2 2011. Their bottom line was up about the same percentage.

While revenue has grown, the company’s expenses have been well controlled.

Management is working hard to control expenses because of the potential for continued slow economic growth. Management is determined to stay profitable through the slowdown.

KEY METRICS ANALYSIS

Trailing P/E                                    4.5 x
Price / Sales                                  0.2 x
Return on Assets                          11.8%
Insider ownership                          15.5%
Short Ratio                                     6.3 x
Current Ratio                                 2.7 x
Total Debt To Equity                       25.2 x

RECENT EVENTS

Although the company specializes in gas delivery systems for semiconductor manufacturing they’re actively expanding their product lines. The company has made inroads into solar panel and medical equipment manufacturing equipment.

UCTT has expanded sales to the point where only about 55% of their revenue is from gas delivery systems.

The company’s also focusing on expanding manufacturing in Asia. It’s a growing market, and a number of new and existing customers are looking for UCTT’s expanded capabilities. The company opened two manufacturing facilities in Shanghai and one in Singapore in 2010.

MANAGEMENT TEAM

Clarence Granger – CEO
Gino Addiego – COO
Casey Eichler – CFO
Bruce Wier – Senior VP of Engineering

STOCK ANALYSIS

 

 

 

 

 

 

Chart Courtesy of StockCharts.com

UCTT’s price started floundering in July, along with the market. It looks as if this stock has found a bottom of about $4 in early October.

PSTR’s 52-week low was $3.77 and the 52-week high was $13.62. Right now the stock is trading at $4.54. The 50-day moving average is near $4.76 a share and the 200-day moving average is at $8.00. The company has a market cap of $103.6 million and 22.8 million shares outstanding.

 

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