Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Ichor Holdings Jumped Today

By Timothy Green - Aug 24, 2018 at 1:25PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The semiconductor equipment stock is headed to a small-cap index.

What happened

Shares of Ichor Holdings (ICHR 5.17%) rose on Friday after S&P Dow Jones Indices announced that the semiconductor equipment manufacturer would be added to the S&P SmallCap 600 index. The stock was up about 11.4% as of 12:25 p.m. EDT.

So what

Ichor will join the S&P SmallCap 600 index, which is designed to track the small-cap segment of the U.S. equity market, prior to the start of trading on Monday, Aug. 27. The company will replace Super Micro Computer, which has been suspended from trading on the Nasdaq and is no longer eligible for inclusion in the index.

A rising stock chart.

Image source: Getty Images.

The S&P SmallCap 600 index isn't nearly as closely followed as the S&P 500 index. The Vanguard fund that tracks the S&P SmallCap 600 has just $2 billion of net assets, compared to more than $400 billion for the Vanguard fund that tracks the S&P 500. But investors are bidding up shares of Ichor nonetheless.

Now what

Ichor operates in a cyclical industry, which helps explain why the stock has tumbled 30% from its 52-week high despite extremely strong growth. Revenue surged 56% year over year in the second quarter, while non-GAAP earnings per share shot up 70%. But the market is anticipating weaker results ahead, valuing the stock at a single-digit multiple of trailing-12-month earnings.

Ichor is getting a boost from the index news, but the company will need to show it can withstand a downturn before investors give it credit for its results.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ichor Holdings, Ltd. Stock Quote
Ichor Holdings, Ltd.
$29.71 (5.17%) $1.46

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.