Amkor Technology Inc (AMKR, Financial) experienced a daily loss of 15.68% and a 3-month loss of 13.56%. Despite these figures, the company boasts an impressive Earnings Per Share (EPS) (EPS) of 2.35. The question that arises is whether the stock is fairly valued? We invite you to delve into our comprehensive analysis to find out.
Company Overview
Amkor Technology Inc is a leading provider of outsourced semiconductor packaging and test services. The company's clientele includes integrated device manufacturers, fabless semiconductor companies, and contract foundries. Amkor Technology's products are divided into advanced products, such as flip chip, wafer-level processing, and testing services, and mainstream products that include wirebond packaging and testing. The company generates approximately a third of its revenue in the United States, with the remainder coming from various countries worldwide, including China, Ireland, Japan, Malaysia, Taiwan, and Singapore.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value that the stock should be traded at. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Based on our valuation method, Amkor Technology (AMKR, Financial) appears to be fairly valued. At its current price of $22.99 per share, Amkor Technology has a market cap of $5.60 billion. Because it is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, investors must review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are great ways to understand its financial strength. Amkor Technology has a cash-to-debt ratio of 0.92, which ranks worse than 67.37% of 895 companies in the Semiconductors industry. The overall financial strength of Amkor Technology is 7 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. A company with high profit margins is typically a safer investment than one with low profit margins. Amkor Technology has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $6.90 billion and an EPS of $2.35. Its operating margin is 9.96%, which ranks better than 59.59% of 938 companies in the Semiconductors industry. Overall, GuruFocus ranks the profitability of Amkor Technology at 9 out of 10, indicating strong profitability.
Growth is probably one of the most important factors in the valuation of a company. If a company's business is growing, it usually creates value for its shareholders, especially if the growth is profitable. Amkor Technology's 3-year average revenue growth rate is better than 68.25% of 863 companies in the Semiconductors industry. Its 3-year average EBITDA growth rate is 25.4%, which ranks better than 53.79% of 766 companies in the Semiconductors industry.
ROIC vs WACC
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. For the past 12 months, Amkor Technology's return on invested capital is 14.75, and its cost of capital is 13.32.
Conclusion
In conclusion, Amkor Technology's stock shows every sign of being fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 53.79% of 766 companies in the Semiconductors industry. To learn more about Amkor Technology's stock, you can check out its 30-Year Financials here.
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