More on MEMC (WFR)
I wrote a few weeks ago that I was just as confused about MEMC's movement and earnings as everyone else. Their last earnings report was filled with special one-time charges and confusing setasides and pushforwards and, in the end, was a "miss" according to the Street consensus.
But since then, MEMC Electronic Materials (WFR) has been on a tear, returning to around $20 from it's earnings letdown price of around $17. Not bad, and I think more good things are coming.
As many folks have noted, extremely tight polysilicon supplies and high demand for wafers and silicon products from both semiconductor companies and the burgeoning solar power industry are both great growth trends for MEMC, and it seems as through the Street is coming around to accepting that the turnaround at MEMC after their past troubles is now well in place and they can be trusted to get a market multiple and, perhaps in the near future, a premium multiple comparable to their compatriots in the semiconductor sector.
Read a good SmartMoney article on MEMC today -- here's the salient quote:
"All told, analysts figure that MEMC will boost its earnings by 15% annually over the next five years. At about 15 times projected 2005 earnings, then, the stock carries a price/earning-to-growth, or PEG, ratio of 1.0. The average for semiconductor stocks is 1.5, roughly the broader market's average PEG. What are those who bought shares at the time of our last story to do with their now-pricier position? Nothing. With a still-clean balance sheet, improving fundamentals and forecasts for more of the same, this wafer maker offers thin reason for shareholders to sell."
I agree. I'm holding and see no reason to sell as long as chip production appears to still be on the upswing, though I expect the coming years to offer some significant volatility if WFR begins to trade more in step with the Semis. Should be interesting.
But since then, MEMC Electronic Materials (WFR) has been on a tear, returning to around $20 from it's earnings letdown price of around $17. Not bad, and I think more good things are coming.
As many folks have noted, extremely tight polysilicon supplies and high demand for wafers and silicon products from both semiconductor companies and the burgeoning solar power industry are both great growth trends for MEMC, and it seems as through the Street is coming around to accepting that the turnaround at MEMC after their past troubles is now well in place and they can be trusted to get a market multiple and, perhaps in the near future, a premium multiple comparable to their compatriots in the semiconductor sector.
Read a good SmartMoney article on MEMC today -- here's the salient quote:
"All told, analysts figure that MEMC will boost its earnings by 15% annually over the next five years. At about 15 times projected 2005 earnings, then, the stock carries a price/earning-to-growth, or PEG, ratio of 1.0. The average for semiconductor stocks is 1.5, roughly the broader market's average PEG. What are those who bought shares at the time of our last story to do with their now-pricier position? Nothing. With a still-clean balance sheet, improving fundamentals and forecasts for more of the same, this wafer maker offers thin reason for shareholders to sell."
I agree. I'm holding and see no reason to sell as long as chip production appears to still be on the upswing, though I expect the coming years to offer some significant volatility if WFR begins to trade more in step with the Semis. Should be interesting.
Labels: WFR
This article posted by One Guy @ 11/03/2005 02:13:00 PM 2 comments
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