ENTG - Embedded Expectations Analysis - 2021 09 15
Entegris, Inc. (ENTG:USA) currently trades above historical averages relative to UAFRS-based (Uniform) earnings, with a 32.9x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may have concerns about the resilience of their business model, sequential growth, and margins in the Advanced Materials Handling (AMH) segment.Specifically, management may have concerns about the resilience of their business model, the margin mix impact in their SCEM business, and the significance of non-core intellectual property (IP) sales. Also, they may be overstating recent outperformance relative to peers and the potential of their extreme ultraviolet light (EUV) technology. Finally, they may lack confidence in their ability to maintain sequential growth across all regions, meet broad-based guidance, and sustain above-target margin levels in the Advanced Materials Handling (AMH) segment.
Entegris is a developer, manufacturer and supplier of microcontamination control products, chemicals and materials handling solutions for manufacturing processes in the semiconductor and other industries. The company has three segments: Specialty Chemicals and Engineered Materials, which provides process chemistries, gases, and materials; Microcontamination Control, which provides solutions to filter and purify liquid chemistries and gases used in semiconductor manufacturing processes and other industries; and Advanced Materials Handling segment, which develops solutions to monitor, protect, transport, and deliver liquid chemistries, wafers and substrates.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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