The most recent news was absolutely positive. Cohu, Inc. (COHU) reported earnings and revenue that exceeded investors’ expectations. Earnings per share (EPS) were $0.89 compared to projections of $0.78 and sales topped the consensus by a little more than 1%. (1)
Cohu President and CEO Luis Müller says more is to come, telling analysts and shareholders on the quarterly conference call, “Year-to-date results and our forecast put Cohu on track for record full year revenue and profitability, benefiting from strong 5G mobility, automotive and improving consumer and industrial semiconductor demand.” (2)
All this good news and the stock has dropped to its lowest level in 2021. A couple of COHU insiders, Director Yon Jorden and CEO Muller, must have recognized an opportunity. The duo stepped into the open market and bought shares of the chipmaker. Jorden purchased 3,000 shares and Muller 3,200 for investments of $92,670 and $99,904, respectively. (3)
Director Jorden is a habitual buyer. (4) It’s Muller’s buy that set off our insider buy with purpose alarms. (5) Until last week, the Chief Executive Officer has been nothing but a seller to the tune of $5.676 million. That’s what we call a change of heart buy.
Perhaps, Muller saw some value in his company at current prices. Cohu trades at 12.4 times earnings (P/E), compared to 25.49 for its average peer. The tech company is also discounted on a price to sales (P/S) basis, valued at 1.9 times revenue versus 3.06 for the industry.
Wall Steet forecasts COHU to hit $3.04 in earnings per share (EPS) and $902.79 million in sales for 2021. However, earnings are expected to dip to $2.99 and sales to slip to $895.66 million in 2022. (6) Perhaps, it’s the projected decline in the top and bottom lines for next year that concerns traders.
If COHU hits 2022’s targets and traded at the industry’s average P/E and P/S ratios, then the Semiconductor Equipment & Materials maker would trade at $76.22 and $56.39, respectively. Standalone, Cohu’s average P/E for the past five-years is 48.92 with an average P/S ratio of 1.88. Using COHU’s half decade numbers, Cohu’s stock price would be $146.27 based on P/E and $34.64 on a P/S basis. Meanwhile, Wall Street has a one-year price target of $48.44. (7)
Overall: Semiconductor chip shortages should continue to drive demand for Cohu, Inc. (COHU). Forecasted 2022 earnings and sales, along with average industry and company P/E and P/S ratios, suggest COHU might have limited downside and sizable upside.
A pair of insider buys, specifically CEO Muller, hint at management seeing value on COHU shares at their current level. COHU could be appropriate for investors seeking exposure to the semiconductor sector and have an average risk tolerance.
1 – https://finance.yahoo.com/news/cohu-cohu-q2-earnings-revenues-133501699.html
2 – https://finance.yahoo.com/news/cohu-reports-second-quarter-2021-120000781.html
3 – https://www.secform4.com/insider-trading/21535.htm
4 – https://www.secform4.com/insider-trading/1189397.htm
5 – https://www.secform4.com/insider-trading/1509513.htm
6 – https://finance.yahoo.com/quote/COHU/analysis?p=COHU
7 – https://finance.yahoo.com/quote/COHU?p=COHU