Despite temporary setbacks caused by macroeconomic challenges, the semiconductor industry is expected to see positive long-term growth due to increased demand in the technology, automotive, and healthcare industries.
Given the industry’s growth prospects, fundamentally strong semiconductor stocks Trio-Tech International (TRT), ASE Technology Holding Co., Ltd. (ASX) and inTest Corporation (INTT) might be worth adding to your watchlist.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the semiconductor industry.
The Semiconductor Industry Association (SIA) reported that global semiconductor industry sales totaled $48 billion in November 2023, up 5.3% from $45.6 billion in November 2022 and 2.9% from the October 2023 total of $46.6 billion.
John Neuffer, SIA president and CEO, said, “Global semiconductor sales increased on a year-to-year basis in November for the first time since August 2022, an indication that the global chip market is continuing to gain strength as we enter the new year. Looking ahead, the global semiconductor market is projected to experience double-digit growth in 2024.”
In addition, demand for semiconductors remains as strong as ever. The semiconductor market is expected to expand due to the growing consumer electronics industry, technological advancements, and investment, as well as rising demand from the automotive sector. The market is expected to reach $1.88 trillion by 2032, with a CAGR of 12.3%.
Moreover, investors’ interest in chip stocks is evident from the VanEck Vectors Semiconductor ETF’s (SMH) 17.1% returns over the past three months.
Considering these conducive trends, let’s look at the fundamentals of the three Semiconductor & Wireless Chip stocks, starting with number 3.
Stock #3: Trio-Tech International (TRT)
TRT offers semiconductor manufacturing, testing, and distribution services globally. The company specializes in developing test equipment and provides testing services for semiconductor manufacturers.
TRT’s trailing-12-month EV/Sales of 0.26x is 91.1% lower than the industry average of 2.91x. Its trailing-12-month EV/EBIT of 8.54x is 60.4% lower than the industry average of 21.56x.
TRT’s trailing-12-month EBITDA margin of 16.62% is 76.5% higher than the industry average of 9.42%. Its 8.28% trailing-12-month CAPEX / Sales is 250.2% higher than the 2.37% industry average.
In the first quarter ended September 30, TRT generated revenue and net income of $9.97 million and $207 thousand. The company’s EPS stood at $0.05. Its operating expenses declined 1.3% year-over-year to $2.52 million.
In addition, as of September 30, 2023, the company’s current assets stood at $32.35 million, compared to $28.83 million as of June 30, 2023.
TRT’s shares have gained 11.5% over past nine months to close the last trading session at $5.03.
TRT’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
TRT has an A grade for Value and Momentum and a B for Sentiment. Within the Semiconductor & Wireless Chip industry, it is ranked #15 out of 91 stocks. To see additional POWR Ratings for Growth, Stability and Quality for TRT, click here.
Stock #2: ASE Technology Holding Co., Ltd. (ASX)
Headquartered in Kaohsiung, Taiwan, ASX and its subsidiaries provide semiconductor packaging, testing, and electronic manufacturing services in the United States, Taiwan, Asia, Europe, and internationally.
ASX’s forward EV/Sales of 1.18x is 58.4% lower than the industry average of 2.83x. Its forward Price/Sales of 0.91x is 67.8% lower than the industry average of 2.83x.
ASX’s trailing-12-month ROTA of 5.35% is significantly higher than the industry average of 0.38%. Its trailing-12-month ROCE of 12.83% is 909.2% higher than the industry average of 1.27%.
ASX’s total net revenues for the fiscal third quarter that ended September 30, 2023, came in at NT$154.17 billion ($4.90 billion). Its net income attributable to ASX and EPS came in at NT$8.78 billion (279.34 million) and NT$2, respectively. Its total current assets came in at NT$292.69 billion ($9.30 billion), compared to NT$271.03 billion ($8.61 billion) as of June 30, 2023.
Additionally, its net cash generated from operating activities rose 12.1% year-over-year to NT$20.88 billion ($663.20 million).
Analysts expect ASX’s revenue to increase 21.2% year-over-year to $22.69 billion for the year ending December 2024. Its EPS is expected to grow 60.2% year-over-year to $0.73 for the same period. It surpassed EPS estimates in three of four trailing quarters. The stock has gained 23.7% over the past year to close the last trading session at $8.72.
It’s no surprise that ASX has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Value and a B for Sentiment and Momentum. It is ranked #13 in the same industry.
Beyond what is stated above, we’ve also rated ASX for Growth, Stability and Quality. Get all ASX ratings here.
Stock #1: inTest Corporation (INTT)
INTT is a global provider of testing and process solutions across various industries, including automotive, defence/aerospace, industrial, life sciences, security, and semiconductor manufacturing. They offer innovative solutions for both the front-end and back-end of semiconductor manufacturing.
INTT’s forward non-GAAP P/E of 12.34x is 48.1% lower than the industry average of 23.76x. Its forward EV/EBITDA of 6.75x is 56.8% lower than the industry average of 15.61x.
INTT’s trailing-12-month ROCE of 15.25% is significantly higher than the 1.27% industry average. Its trailing-12-month ROTA of 8.78% is significantly higher than the 0.38% industry average.
For the fiscal third quarter, which ended on September 30, 2023, INTT’s revenue increased marginally year-over-year to $32.66 million, while its net earnings came in at $2.97 million, up 17.5%. The company’s adjusted EPS for the same period came in at $0.28. Also, its adjusted EBITDA increased 2.9% year-over-year to $4.58 million.
The consensus revenue estimate of $125.80 million for the year ending December 2024. Its EPS is expected to come in at $0.79 for the same period. The stock has gained marginally intraday to close the last trading session at $12.15.
INTT has an overall B rating, equating to a Buy in our POWR Ratings system.
INTT’s is ranked #11 in the same industry. It has an A grade for Value and a B for Sentiment and Momentum. To see additional INTT’s ratings for Growth, Stability and Quality, click here.
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ASX shares were trading at $8.57 per share on Wednesday morning, down $0.15 (-1.72%). Year-to-date, ASX has declined -8.93%, versus a -0.65% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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