Should you buy Photronics stock? (May 2024)

Published first at https://www.3minutebreakdowns.com Photronics stock analysis. Ticker: $PLAB Photronics is a leading manufacturer of photomasks, which are used to transfer tiny circuit patterns onto semiconductor wafers, often used in flat panel displays. Over the last 12 months Photronics has reported just under 900 million dollars of revenue, 138 million of net income and 173 million of free cash flow. So, with a market cap of 1.8 billion, the valuation looks extremely attractive. The company trades at just 13 times earnings, under 8 times free cash flow and under 4 times ebitda. That’s especially cheap when you consider the high multiples applied to other semiconductor stocks right now. And it’s not like Photronics isn’t growing. Revenue over the last 5 years has grown at a rate of 11% a year with Photronics gaining a 30% share in photomasks. And that market should continue to expand thanks to exploding trends such as AI, electric vehicles and the internet of things. But although 3.8 times ebitda seems incredibly low, it's not actually unusual for Photronics. As you can see from the chart, the company has traded at even lower multiples in the past and that’s largely due to high depreciation charges. Photomasks require a large amount of technical work and capital investment to match customer specifications. As a result, Photronics averages significant capital expenditure, around 17% of revenue. In other words, Photronics needs to keep reinvesting capital just to stay still and that ultimately affects free cash flow generation and earnings. #investing #stockstowatch #stockmarket #3mb