IIVI - Embedded Expectations Analysis - 2021 09 16
II-VI Incorporated (IIVI:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 19.7x Uniform P/E, implying bearish expectations for the firm. Although management may be concerned about guidance, 200G and 400G transceiver sales, and silicon carbide product demand, market expectations are too bearish, and long-term equity upside is warranted.Specifically, management may lack confidence in their ability to meet Q1 EPS guidance and 2022 revenue forecasts for the semiconductor capital equipment business. Additionally, they may be exaggerating their pricing power in the transceiver business, and they may lack confidence in their ability to sustain 200G and 400G transceiver sales growth and improve their revenue mix. Moreover, they may be exaggerating the demand for silicon carbide products and the potential of their new modules in the automotive market. Finally, management may be concerned about the margin impact of COVID-related costs and persisting supply chain constraints.
Although management may be concerned about guidance, transceiver sales, and silicon carbide product demand, market expectations are too bearish given the firm's massive tailwinds in 5G and IoT, and long-term equity upside is warranted
II-VI develops, manufactures, and markets engineered materials, optoelectronic components, and devices for a range of applications. The company has three segments: II-VI Laser Solutions, which designs, manufactures, and markets optical and electro-optical components and materials sold under the II-VI Infrared brand name; II-VI Photonics, which manufactures crystal materials, optics, microchip lasers, and optoelectronic modules for use in optical communication networks and other consumer applications; and II-VI Performance Products, which designs, manufactures, and markets infrared optical components and optical assemblies for aerospace and defense, medical and commercial laser imaging applications.
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