Amtech has been treading water for the past six months, recording a small loss of 4.1% while holding steady at $5.45. The stock also fell short of the S&P 500’s 9.3% gain during that period.

Is now the time to buy Amtech, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.

We're sitting this one out for now. Here are three reasons why you should be careful with ASYS and a stock we'd rather own.

Why Do We Think Amtech Will Underperform?

Focusing on the silicon carbide and power semiconductor sectors, Amtech Systems (NASDAQ: ASYS) produces the machinery and related chemicals needed for manufacturing semiconductors.

1. Long-Term Revenue Growth Disappoints

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Amtech grew its sales at a sluggish 3.5% compounded annual growth rate. This fell short of our benchmark 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. EPS Trending Down

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Sadly for Amtech, its EPS declined by 20% annually over the last five years while its revenue grew by 3.5%. This tells us the company became less profitable on a per-share basis as it expanded.

3. Cash Burn Ignites Concerns

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Amtech’s demanding reinvestments have drained its resources over the last two years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 5.1%, meaning it lit $5.10 of cash on fire for every $100 in revenue.

Final Judgment

Amtech falls short of our quality standards. With its shares trailing the market in recent months, the stock trades at 19.9× forward price-to-earnings (or $5.45 per share). This multiple tells us a lot of good news is priced in - you can find better investment opportunities elsewhere. We’d recommend looking at the Amazon and PayPal of Latin America.

Stocks We Like More Than Amtech

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