Ultra Clean Technologies — NASDAQ:UCTT

About Ultra Clean Technologies

Ultra Clean Holdings, Inc. engages in the development, manufacture, and supply of semiconductor capital equipment. It offers supply chain management, metal fabrication, precision machining, system integration, thermal control, and three-dimensional printing.

The company was founded in November 2002 and is headquartered in Hayward, CA

$11.90
Entry Price
$21.69
Share Price
+82%
Trade Return
696
Trade age — days

Overview

The company creates components and machines that eventually end up in Samsung’s (OTC:SSNLF) and Micron’s (NASDAQ:MU) factories. They provide manufacturing for Lam Research, at a profit.

The semiconductor manufacturing industry is currently in a large upswing, and UCTT is positioned to make strong profit. However, the downside risk relates to how long and strong the upswing is.

With global growth in cloud, mobile and IoT accelerating the downside for UCTT is limited from here.

Growth Drivers

  • Continued semiconductor cyclical upswing
  • Margin improvements with increased revenue

Risks

  • The company’s place in the supply chain is possibly a disadvantage for margins and growth potential.
  • Semiconductor is in a cyclical upswing
  • Ultra Clean is already up more than 200% YoY

Valuation Metrics

Q3 2016 EPS was $0.17 up 70% YoY.

Q4 2016 Outlook - The company has provided a notice of revenue to be well above guidance for Q4 2016. As such, expect upcoming quarter to have non-GAAP earnings of at least 0.22.

At foreward EPS at least $0.88, this puts the company on a PE of 13 with earnings growing 30% QoQ with further growth potential on the cards for 2017.

We see UCTT has the potential to return 100% in the coming 12 months.

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Stock notes

22 Feb 2017

Q4 2016 results beat guidance

EPS of $0.35 blowing out our forecast guidance of $0.22

Q1 2017 Outlook - EPS of $0.40 to $0.45.

The company also mentioned the weighting of revenue likely to be 55% first half 2017 vs 45% second half 2017.

As such, forecast 12m EPS of $1.36+

At $14.71 PE = 10.8, providing a stronger value proposition than when we first recommended the trade.

From management:

By expanding our capabilities beyond gas panels and keeping pace with exceptional market demand, we are creating an even stronger link with our customers and have been able to capitalize on new opportunities. We are well positioned to reach our longer-term revenue and profitability goals.

24 Apr 2017

Q1 2017 results beat guidance - again

EPS of $0.47 / share, above guidance of $0.40 - $0.45

Good to see continued growth, no change in valuation metrics.

Management:

We continue to increase UCT’s presence on our customers’ product platforms and are expanding our opportunities for future growth