When fears about interest rates run rampant on the stock markets, they usually affect growth stocks in particular. This is because the future’s traded in these stocks. If a company is growing strongly, its value is measured by the profits it may generate in two, three or five years. And this value depends crucially on the interest rate at which future profits are discounted.
It is therefore not surprising that technology stocks in particular have been under fire in the recent correction. Chip manufacturers, some of which had recorded high price gains in recent months, were particularly hit hard. However, Micron Technology (NASDAQ:MU) recently provided a boost for chip stocks with an optimistic outlook.
Today, I would like to introduce you to a company that probably only a few of you know: Entegris Inc. (NASDAQ:ENTG). The US group is one of the most important suppliers for the semiconductor industry.
Important Supplier for the Chip Industry
The Massachusetts-based firm operates in an exciting market. Entegris provides chemical products and systems that clean, protect and transport materials used in the manufacturing of semiconductor devices.
As a supplier to the booming semiconductor industry, the U.S. company has been growing strongly for years. Over the past five years, profits have increased by an average of 26% per year. For the next five years, analysts expect average profit increases of 17%.
Entegris is Growing Rapidly
Recent business figures confirm the rapid growth. In the third quarter, the semiconductor supplier increased sales by 20% to $579.5 million. Net income went up by 37% to $125.4 million or 92 cents per share, which was better than estimations.
For the fourth quarter, management expects sales of $590 million (+15%) and earnings per share of 90 cents (+29%). For fiscal 2021, which is now ending, analysts forecast a 21% increase in revenue. Earnings per share are expected to advance by as much as 32%.
Entegris Strengthens its Market Position
Entegris announced an acquisition that further expands its strong market position. For $6.5 billion, the group is acquiring CMC Materials. The smaller competitor generated revenues of $1.20 billion in the past fiscal year.
The company is also investing around $500 billion in the construction of a new factory in Taiwan. When fully operational, the new plant could generate an additional $500 million in annual sales. By comparison, Entegris generated revenues of $1.86 billion last year. This year, analysts expect revenues of $2.26 billion.
Upward Trend is Unbroken Despite Setbacks
Entegris stock has been on an impressive upward trend for many years. Within a decade, the share price has improved by a good 1,400%. In the past five years, the share price has risen by more than 600%. This corresponds to an average increase of 49% per year.
Everything points to a continuation of this trend. During the recent setback, the stock held the $126 line. Just below it at around $125, the rising 200-day line provides additional support.
If the market situation strengthens, the Entegris share should soon return to its all-time high of $158 at the end of November. If this mark is broken, prices around $180 are realistic in the medium term. At the current level – around 16% below the high – there is an interesting entry opportunity in this top trend stock.