The past six months have been a windfall for Amtech’s shareholders. The company’s stock price has jumped 212%, hitting $14.10 per share. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is now the time to buy Amtech, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Do We Think Amtech Will Underperform?

Despite the momentum, we're swiping left on Amtech for now. Here are three reasons you should be careful with ASYS and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, Amtech’s sales grew at a mediocre 3.9% compounded annual growth rate over the last five years. This was below our standard for the semiconductor sector. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.

2. Projected Revenue Growth Shows Limited Upside

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Amtech’s revenue to stall. Although this projection suggests its newer products and services will spur better top-line performance, it is still below average for the sector.

3. Previous Growth Initiatives Have Lost Money

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Amtech’s five-year average ROIC was negative 1.9%, meaning management lost money while trying to expand the business. Its returns were among the worst in the semiconductor sector.

Final Judgment

Amtech falls short of our quality standards. Following the recent rally, the stock trades at 33× forward P/E (or $14.10 per share). This multiple tells us a lot of good news is priced in - you can find more timely opportunities elsewhere. We’d recommend looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.

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