Entegris’s stock price has taken a beating over the past six months, shedding 25.5% of its value and falling to $82 per share. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Is there a buying opportunity in Entegris, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Do We Think Entegris Will Underperform?
Even with the cheaper entry price, we're swiping left on Entegris for now. Here are three reasons why ENTG doesn't excite us and a stock we'd rather own.
1. Revenue Tumbling Downwards
Long-term growth is the most important, but short-term results matter for semiconductors because the rapid pace of technological innovation (Moore's Law) could make yesterday's hit product obsolete today. Entegris’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 4.5% over the last two years. 
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 Entegris’s revenue to stall. Although this projection suggests its newer products and services will fuel better top-line performance, it is still below average for the sector.
3. Free Cash Flow Margin Dropping
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.
As you can see below, Entegris’s margin dropped by 8.9 percentage points over the last five years. This along with its unexciting margin put the company in a tough spot, and shareholders are likely hoping it can reverse course. If the trend continues, it could signal it’s becoming a more capital-intensive business. Entegris’s free cash flow margin for the trailing 12 months was 8.3%.
Final Judgment
Entegris falls short of our quality standards. After the recent drawdown, the stock trades at 20.5× forward P/E (or $82 per share). This multiple tells us a lot of good news is priced in - we think there are better stocks to buy right now. We’d recommend looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.
Stocks We Like More Than Entegris
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