Veeco Shouldn't Be Cheap

• Report this Comment On February 08, 2011, at 8:26 PM, ETFsRule wrote:

  I'm interested in VECO, but I have one question: what's up with the 2012 earnings estimate of only $2.89 per share? Should I disregard that?

• Report this Comment On February 09, 2011, at 8:45 AM, McFlipp wrote:

  Just looking at current earnings and current valuation, Veeco looks extremely cheap:

  Market Cap: 1.9B

  Debt: 100M

  Cash: 700M

  Enterprise Value: 1.3B

  Normalized conservative estimate of earnings around 200 million per year. So you currently pay 6.5 times earnings! Thats a 15%+ earnings yield.

  I think that provides a nice margin of safety for potential declining sales, although I think at least for the coming 5 years sales will stay at current levels or increase.

  The focus and earnings now come for nearly 90% from LED. As you said they have some OLED plans which they have not revealed and their solar technologies are just starting up. Next to that they seem to have their R&D program on track, which was proved by their introduction of MaxBright only 12 months after the K465i systems. So there is plently of upside earnings potential as well.

  The risk reward ratio still seems very favourable. I bought at $36 so the risk reward was even better than, but I think even at todays prices it is a good buy.

• Report this Comment On February 09, 2011, at 11:13 AM, FoolSolo wrote:

  VECO is too undervalued, and the short-interest in the stock is pretty high (29.79%) , setting up for a nice short squeeze . A small handful of analysts have been very negative about the Chinese, Korean and Taiwan LED markets, and in particular about China scaling back subsidies for LED lighting, so despite VECO's phenomenal results they keep getting beat down.

  On the numbers, VECO is quite cheap, assuming they can maintain their current performance. But compared to their arch rival, AIXG, they seem to be valued at about half of AIXG's valuation. I don't understand why. While they have some differences in their product lines, these two companies are more alike than not, yet VECO is not getting any love from Mr. Market.

  VECO's market cap of $1.9B on sales of $779.6M is well below half of AIXG, which has sales of $923M and a cap of $4.44B. Similarly, other valuation numbers are way off, for example; VECO P/B = 3.54, AIXG P/B = 6.03, VECO P/S = 2.44, AIXG P/S = 4.81, VECO P/FCF = 8.96, AIXG P/FCF = 17.50. Despite the low valuation for VECO, they have a slightly higher profit margin at 23.42% vs. 22.93% for AIXG, and VECO has ROE = 49.59% vs. 40.54% for AIXG.

  Although VECO sales have not been as consistent as AIXG over the past 5 years, and AIXG pays a very small dividend, it doesn't seem to justify the variation in value between the two. Either AIXG is overvalued, or VECO is undervalued, or maybe a bit of both. I'm willing to bet VECO has more upside potential than AIXG long-term, so I've bought Veco on the last dip, and I also have puts that will increase my holdings (or pay me a nice premium) in April. And when those shorts decide to run for cover, I think we'll see a real nice pop on VECO.

• Report this Comment On February 13, 2011, at 1:12 AM, flashfinancials wrote:

  The article notes "metrology rivals" KLAC and Agilent. Veeco sold off its metrology business about a year ago, they are focused on MOCVD semiconductor manufacturing tools. The tools are used primarily in LED, also a bit in solar. It's largely a duopoly in their market, their rival is Aixtron. Besides the odd comment about metrology, I agree with the article and the other posts. Veeco is focused on a great market and is executing well. I am long on Veeco.

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