Summary
Nova provides advanced metrology solutions to the semiconductor industry.
Recent results have been good, beating estimates.
Share price has decent amount of buyers.
Introduction
Worldwide semiconductor revenue is set to hit $364bn in 2017, according to a recent report from Gartner. And as the demand for smaller, more complex semiconductors increases, the demand for advanced metrology solutions is also likely to rise.
One company set to capitalize on this demand is $460m market-cap Nova Measuring Instruments (NASDAQ:NVMI). Nova specializes in providing advanced metrology solutions to the semiconductor industry, partnering with its clients to add significant value across the entire product life cycle.
In this article we present a concise investment analysis of the semiconductor metrology specialist, and examine whether the strong recent share price momentum can continue.
Company description
Nova Measuring Instruments is a provider of advanced metrology solutions to the semiconductor industry. Headquartered in Israel, the company provides a full range of metrology products and services to address the ever-increasing technical challenges arising in the semiconductor industry.
Metrology is an essential component of semiconductor process development and manufacturing. As semiconductor complexity increases, and the demand for smaller, more powerful devices increases, process development becomes more challenging. The metrology function measures embedded details and critical profile parameters with the aim of reliably providing the precise measurements required for ensuring a tight process control and increased yields.
Nova places a strong focus on long-term partnerships with its clients, striving to understand both current and future needs in order to develop advanced control methodologies precisely suited to the customer's requirements. This enables Nova's customers to improve process performance, enhance product yields and accelerate time to market.
Nova employs over 500 employees and has subsidiaries in the USA, Europe, Japan and the Asia-Pacific region. The company is listed on both the NASDAQ and the Tel Aviv 100 index.
Financials & Ratios
Nova's revenues have increased substantially in recent years. The top-line has grown from $102.8m in FY2011 to $163.9m for FY2016, a five-year compound annual growth rate (CAGR) of 9.8%.
Analysts following Nova expect the company to generate revenue of $184.3m and $200.0m for FY2017 and FY2018, year-on-year growth of 12.4% and 8.5% respectively.
The company's enterprise value (EV) to sales ratio of 2.26 also suggests that the stock is not expensive. Nova currently has no debt on its balance sheet. Nova had sizeable cash reserves of $91.7m at the end of 2016.
As the semiconductor market continues to strive to develop smaller, more powerful products, the need for advanced metrology solutions is likely to remain robust. Nova believe that the metrology market is growing at an annual rate of 17% per year and that this growth will continue in the coming years.
Disclosure:
At the time of this publication, some model portfolios at www.HedgedEquity.com have a long position in NVMI.
The use of this article is for educational and informational purposes only. NOT investment advice.
The use of this article is for educational and/or informational purposes only. None of the material presented in this article should be construed as investment advice (neither direct, explicit, or implied). It is strongly suggested and recommend that you do your own due diligence and/or consult a qualified financial advisor for any investment advice based on your situation.