IQE another good growth stock??
Recently through my research i came across IQE a technology stock which seems to have a great potential for growth:
IQE plc is a United Kingdom-based holding company. The Company is engaged in the research, development and provision of engineering consultancy services to the compound semiconductor industry. It is engaged in the sale of advanced semiconductor materials. Its operating segments are wireless, photonics and electronics. Its finished products are compound semiconductor wafers. It operates in the United States, Asia and Europe. Its products include heterojunction bipolar transistor (HBT), edge emitting lasers, vertical-cavity surface-emitting laser (VCSELs), distributed feedback laser (DFB) lasers, detectors, multi junction concentrating photovoltaics (CPV), metal-semiconductor field effect transistors (MESFETs) and quantum well infrared photodetector (QWIPs), among others.
Forecasted:
PE Ratio of 9
PEG Ratio 0.45
EPS Growth of 25.7%
5.3 million in cash, 31.1 million in net debt, last year they announced net debt of 31.3 million and a net profit of just over 1.63 million so i would not of touched this stock with a barge pole.
With previous net debt taking 19 years to pay back i stick to stocks that can cover net debt in just 3 years, forecast net profit of 12 million is this a good stock to buy?
Seems to me through research its products are in high demand from some large companies and the stock is cheap, in a recent trading update they announced;
POSITIVE MOMENTUM CONTINUES AT IQE
In the wireless market, key customers have continued to enjoy strong revenue growth. The strong outlook is being driven by new flagship smartphone platforms, growth in sales to China, and upgrades to 4G/LTE. This has primarily benefitted their filter businesses, but also provides a stable platform for compound semi-conductor components including Power Amplifiers (PAs).
Strong sequential wireless revenue growth is expected in in the second half of the year, primarily reflecting normal seasonal trends. Also, although of smaller consequence, some temporary production disruption suffered by one customer during Q2 has skewed some sales into Q3. This customer specific issue did not relate to IQE's products, and has since been resolved.
The photonics business has continued to perform well. It is enjoying strong and sustainable revenue growth. This is being driven by a wide array of end market drivers including data centres, optical communication, industrial heating, and a range of sensing applications.
In advanced solar, IQE began pilot production during H1 15 with its triple junction technology now being deployed into field installations. The end customer has a pipeline of projects scheduled for deployment in 2016/17, which we expect to drive steady growth in demand for IQE's epitaxial wafers.
Good progress continues to be made in IQE's other markets, including Gallium Nitride and Compound Semiconductor on Silicon technologies, which are expected to transition to volume over the next two to three years.
On 9 July 2015 IQE also announced a new Joint Venture with Cardiff University to drive the development and commercialisation of compound semiconductor technologies in Europe, and provide an anchor for the development of a compound semiconductor cluster.
The second half has started well, and the Board remains confident that the Group is on track to achieve its expectations for the full year.
Dr Drew Nelson, Chief Executive of IQE, said:
"This was a solid start to the year, in which we delivered continued improvement in our financial results and further reduced our borrowings.
"Our wireless business is proving to be a stable platform to leverage strong and sustainable growth in our photonics business. Beyond this, we are making encouraging progress in advanced solar and power switching, both of which we believe will be high growth markets for IQE in the near future.
"The second half has started well, and we are on track to meet our expectations and deliver continued growth in profits and cash generation."
I would really appreciate any commentary if anybody has information on why it is a good or a bad buy.
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7 comments
What thoughts regarding todays trading statement.
I had expected it to bounce more, while acknowledging a fall in the 4th quarter for wireless, they never the less expect to meet financial expectations, with balance of revenues being made up from non wireless divisions and debt reducing to 25M.
So for me i'm long on the company as Wireless comm are going to grow, and in the 6th month trading statement they estimated they had over 50% of the market in this area. And in components for Hi res Infrared over 80%. So if non wireless can take up the slack, then any improvement on the wireless side, will see a marked improvement in this companies fortunes.
but interested in other views
David
I bought into this at about 9p in 2008, held it up to 50p in 2010 and all the way back down again., where today, IMO, it offers excellent value on traditional measures and the possibility of the hi-tech capability igniting performance at some point.
I do read the announcements about technical milestones achieved, key tech staff hires and so on but cannot claim any insight into their prospects and competitive position from a technical perspective as a result. After all there are many interesting technical developments that have never made the mark. However IQE have managed to maintain a sensible business, producing cash and growing most of the time, while at the same time entering all sorts of new areas where their technology might give them an advantage. The big question for me is whether at some point their business can grow to be a world player in technologies that have become adopted in everyday use, or just continue to supply specialist hi-tech niches. While acknowledging there is always the possibility of failure I am inclined to the former because:
1. they really do seem to have a global lead in some technologies whose use will increase dramatically over the next decade, e.g. in advanced radio chips.
2. they have been battered around for some years but have kept the company in good shape and able to respond to a big opportunity.
3. they have expanded to offer services and product in a number of developing fields, improving the chance of one 'taking off'.
We will see, but for the meantime I remain a holder and believe the management will, if the opportunity presents itself, deliver the promise.
Last years net profit was very low not sure why but this year the forecast is around £17m. My concern about this company is the demand will surely fall if there is a slow down in China, companies like Apple have done very well recently from the growth in that area. My experience with another similar company Pure Wafer (LON:PUR) was interesting but they were saved by a fire and had a big insurance pay out and then they sold the factory in Wales, if not I would have lost quite a bit.
IQE's GaN on SiC achieves breakthrough power and frequency results for Satellite Communications and 5G Applications
Cardiff, UK. 07 October 2015: IQE has been acknowledged for supplying commercially ready 100mm gallium nitride (GaN) on silicon carbide (SiC) epiwafers that were used to produce record results for both high gain and high power density transistor devices, enabling for the first time, flexible monolithic microwave integrated circuit (MMIC) design for efficient high-voltage/high-power broadband operation at frequencies ranging from 0 - 40 GHz.
High frequency microwave capabilities of up to 40GHz (also known as Ka-band) are essential for satellite communications and will become increasingly important for next generation (5G) wireless communications. However, until now, designers have faced compromises between frequency and power.
The breakthrough results are published in IEEE Electron Device Letters, Vol 36, No. 10, October 2015 in an article by Fitch et al. entitled: Implementation of High-Power-Density X-Band AlGaN/GaN High Electron Mobility Transistors in a Millimeter-Wave Monolithic Microwave Integrated Circuit Process. The High Electron Mobility Transistor (HEMT) devices were produced using GaN on SiC wafers purchased from IQE by the US Air Force Research Laboratory, Sensors Directorate, Aerospace Components Division, Devices for Sensing Branch at Wright-Patterson Air Force Base in Dayton, OH.
The solution outlined in the published paper provides designers with the option of incorporating two different devices by implementing a 0.14-?m gate length GaN MMIC process capable of high-efficiency Ka-band operation while simultaneously achieving high power density X-band operation using the same process flow.
The authors demonstrated 7.7 W/mm at 35 GHz and VDS = 30 V on a standard 4 × 65-?m T-gated FET and then 12.5 W/mm at 10 GHz and VDS = 60 V on a 4 × 75-?m T-gated FET by adding a field plate. These are the highest reported power densities achieved simultaneously at X-band and Ka-band in a single wideband GaN MMIC process.
The epiwafers were produced at IQE's New Jersey facility using Metal Organic Chemical Vapour Deposition (MOCVD) on 4?? semi-insulating SiC substrates.
Dr. Wayne Johnson, VP of IQE's Power Business Unit said:
"These results, achieved on our GaN on SiC epiwafers, demonstrate the ability of IQE to produce record-breaking, world leading results on commercial platforms that enable today's leading edge satellite communications and will be essential for enabling next generation wireless technologies."
Thanks Warranstar that definitely helps, do you know any other companies that is associated with IQE like Apple or Samsung?
Hi TradeRyder
IQE sells its products & services to chip MAKERS. They in turn will be selling to chip USERS which may or may not include companies such as Apple, Samsung, Dell. To me it looks like IQE enables their customers to get their products faster to market, at lower cost and at higher specification.
But. of course, my investments don't always go as well as I anticipate. There is no substitute for doing your own research, because that is the only way to making the best decisions.
However. I do also consider other investors views because it is all useful input.
Would anyone else like to comment on IQE's prospects?
Hi TradeRyder.
I recently found IQE through a screen on here. I did my usual analysis and decided to buy some as a result. Here is the summary of my research. Sorry about all the capital letters. That's the way that I have it my original document, so I have just cut & pasted it into here.
ALL STOCK RANKS VERY GOOD. GRAHAM FORMULA MARGIN OF SAFETY VERY GOOD, BUT VERY HARD TO PREDICT DUE TO VARIABLE EARNINGS HISTORY. PEG & PEGR VERY LOW. EPS GROWTH OF 141.4% PREDICTED FOR YR TO DEC 2015. ROCE & MARGIN IMPROVING SIGNIFICANTLY. BROADER SPREAD OF PRODUCTS IS HELPING TO MAKE IT A MORE STABLE BUSINESS. STILL SIZEALE DEBTS BUT ARE REDUCING. A LOT DEPENDS ON THEM GETTING THE R&D RIGHT. IC SAYS BUY. COMPANY IS WORKING WELL TO OVERCOME ITS WEAKNESSES. OVERALL NOT AS PREDICTABLE AS i WOULD LIKE, BUT THERE IS A HIGH POTENTIAL FOR SHARE PRICE APPRECIATION. SHARES ARE CHEAP WITH A VALUE RANK OF 68. 2014 POOR EPS FIGURE WAS DUE TO RESTRUCTURING COSTS. ECONOMIC MOAT IS VERY WIDE.