Send me real-time posts from this site at my email
Motley Fool

Why Photronics Stock Crashed Today

What happened

Shares of semiconductor manufacturing equipment maker Photronics (NASDAQ: PLAB) collapsed after the company reported fourth-quarter 2020 earnings this morning, and remain down 16.5% as of 1:35 p.m. EST.

Analysts had forecast that Photronics, which produces quartz and glass "photomasks" used as guides to manufacture semiconductors and flat panel displays, would earn $0.15 per share in Q4 on sales of as much as $153.9 million. Instead, Photronics reported just $0.10 per share in profit, and sales of only $149.3 million.

Image source: Getty Images.

So what

Despite the miss, Photronics grew its quarterly sales 4% year over year, and reported "record annual revenue" for the year -- $610 million.

Still, the quarter's growth represented a slowdown from the 11% pace set for the year as a whole, and Q4 sales were actually down 5% from the third quarter. Profits also declined -- down 33% from the $0.15 earned a year ago, and down 41% sequentially.

Now what

Adding to shareholders' misery today, Photronics issued new guidance for the first quarter of fiscal 2021 that fell well short of analyst expectations. Instead of the $0.16 in profit and $152.6 million in sales Wall Street will be looking for, Photronics said its profits will range from only $0.07 per share to at most $0.14, and sales will range from $145 million to $155 million -- below consensus at the midpoint.

And yet, there's good news here for long-term investors. For all of 2020, Photronics generated $73.8 million in positive free cash flow, versus burning cash a year ago. Relative to the stock's current $723 million market capitalization, that works out to a valuation multiple of less than 10 times.

Factor in the nearly $220 million in net cash on the company's balance sheet, and Photronics' enterprise value-to-free cash flow ratio drops to just 6.8 times -- a bargain-basement valuation if the company manages to show almost any earnings growth at all next year.

10 stocks we like better than Photronics
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Photronics wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of November 20, 2020

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


Source

Popular posts

Welcome! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue