ACMR Stock Study (10-14-24)

Posted by Mark on October 14, 2024 at 06:23 | Last modified: August 23, 2024 11:16

I recently did a stock study on ACM Research, Inc. (ACMR) with a closing price of $19.22.

CFRA writes:

     > ACM Research, Inc… develops, manufactures, and sells single-wafer wet
     > cleaning equipment for enhancing the manufacturing process and yield for
     > integrated chips worldwide. It offers space alternated phase shift
     > technology for flat and patterned wafer surfaces, which employs
     > alternating phases of megasonic waves to deliver megasonic energy in a
     > uniform manner on a microscopic level; timely energized bubble oscillation
     > technology for patterned wafer surfaces at advanced process nodes, which
     > provides cleaning for 2D and 3D patterned wafers; Tahoe technology for
     > delivering cleaning performance using less sulfuric acid and hydrogen
     > peroxide; and electro-chemical plating technology for advanced metal
     > plating. The company markets and sells its products under the SAPS,
     > TEBO, ULTRA C, ULTRA Fn, Ultra ECP, Ultra ECP map, and Ultra ECP ap
     > trademarks through direct sales force and third-party representatives.

Since 2018, this small-size company has grown sales and earnings at annualized rates of 51.0% and 47.6%, respectively (pre-2018 data excluded from full analysis due to fractional/negative EPS numbers, triple-digit Debt-to-Capital, and a negative ROE print). Lines are up, straight, and parallel except for a YOY EPS decline in ’20. Five-year EPS R^2 is 0.86. Value Line SMC edition mentions a page 4210 that is inaccessible online.

Since 2018, PTPM leads peer averages but trails the industry while increasing from 9.9% to 20.8% (’23) with a last-5-year mean of 16.9%. ROE also leads peer averages and trails the industry while ranging from 5.5% in ’22 to 19.6% in ’19 and ’21 with a last-5-year mean of 13.5%. Debt-to-Capital is slightly higher than peer averages and lower than the industry while ranging from 5.5% in ’21 to 26.2% in ’20 with a last-5-year mean of 13.8%.

Quick Ratio is 1.2 and Interest Coverage is 43.7 per M*.

With regard to sales growth:

• YF projects YOY 30.6% and 21.2% for ’24 and ’25, respectively (based on 7 analysts).
• Zacks projects YOY 30.3% and 22.6% for ’24 and ’25, respectively (3 analysts).
• CFRA reports ACE of 31.0% YOY and 25.5% per year for ’24 and ’23-’25, respectively (6).
• M* provides a 2-year ACE of 19.8% per year.

My 19.0% per year forecast is below the range.

With regard to EPS growth:

• MarketWatch projects 19.2% and 22.7% per year for ’23-’25 and ’23-’26, respectively (based on 7 analysts).
• Nasdaq.com projects 7.6% YOY for ’25 (1 analyst).
• Seeking Alpha projects 4-year annualized growth of 20.0%.
• YF projects YOY 9.8% and 6.1% for ’24 and ’25, respectively (4), along with 5-year annualized growth of 42.7%.
• Zacks projects YOY flat and 4.3% for ’24 and ’25, respectively (1).
• CFRA reports ACE growth of 54.3% YOY and 27.6% per year for ’24 and ’23-’25, respectively (3).

My 15.0% per year forecast is below the long-term-estimate range (mean of only two: 31.4%). Initial value is ’23 EPS of $1.16/share rather than 2024 Q2 EPS of $1.26 (annualized).

My Forecast High P/E is 18.0. Since 2018, high P/E ranges from 18.2 in ’23 to 83.7 in ’21 (excluding 128 in ’20) with last-5-year mean of 43.9 and last-5-year-mean average P/E (also excluding 35.1 low P/E in ’21) of 27.4. I am below the range.

My Forecast Low P/E is 8.0. Since 2018, low P/E ranges from 7.5 in ’23 to 17.9 in ’20 (excluding 35.1 in ’21) with a last-5-year mean of 11.0. I am forecasting near bottom of the range (only ’23 is less).

My Low Stock Price Forecast (LSPF) is $12.50. Default ($10.10) based on initial value seems unreasonably low at 47.5% (19.2%) less than the previous closing price (52-week low). I am using the 52-week low instead: previous close less 35.0%.

These inputs land ACMR on the cusp of the HOLD zone with U/D ratio of 3.0. Total Annualized Return (TAR) is 16.1%.

PAR (using Forecast Average—not High—P/E) of 8.8% is less than I seek for a small-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 109 studies (my study and 32 outliers excluded) over the past 90 days, averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 18.4%, 18.2%, 23.2, and 12.0, respectively. I am lower on all but sales (19.0%). MS projected average annual P/E is 17.6 versus my 13.0.

MS high / low EPS are $2.95/ $1.31 versus my $2.23 / $1.26 (per share). My high EPS is less due to a lower growth rate.

MS LSPF of $13.70 implies Forecast Low P/E of 10.5: less than the 12.0 above. MS LSPF is 12.9% less than the default $1.31/share * 12.0 = $15.72, which results in more conservative zoning. MS LSPF is still 9.6% greater than mine, though.

With regard to valuation, PEG is 0.9 per my projected P/E (Zacks unavailable): one of the lowest I have seen. Relative Value [(current P/E) / 5-year-mean average P/E] is extremely low at 0.58. While the latter excludes the two highest extremes around COVID, subsequent values may also prove to be inflated.

MOS is robust because my inputs are near or below respective analyst/historical ranges and MS averages (sales immaterial to the analysis). Consistent with this is MS TAR being 10.1%/year greater than mine.

I’ve done a decent job putting ACM Research through the ringer and multiple facets look pretty good. I learned about it in a Manifest Investing “Bull Sessions” as a candidate for the 2024 Best Small Companies portfolio. Hopefully soon we can get a more complete data set (e.g. Value Line and possibly M* coverage, Zacks EPS estimate, more from Nasdaq.com and perhaps Argus). Until then, maybe we can also get a lower stock price for the volatile issue [beta 1.55 and “Extreme” uncertainty rating by M* (quantitative)].

Per U/D, ACMR is a BUY under $19.90/share. BI TAR criterion is met right now given a forecast high price ~ $42 (no dividend; this is an unusual circumstance of U/D criterion being more stringent than the TAR criterion).

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