Cohu Inc Valuation – August 2018 $COHU

Company Profile (excerpt from Reuters): Cohu, Inc. (Cohu), incorporated on January 2, 1957, is a supplier of semiconductor test and inspection handlers, micro-electro mechanical system (MEMS) test modules, test contactors and thermal sub-systems used by global semiconductor manufacturers and test subcontractors. The Company develops, manufactures, sells and services a line of equipment capable of handling a range of integrated circuits and light-emitting diodes (LEDs). It operates through semiconductor equipment segment. It offers products for the pick-and-place, gravity-feed, test-in-strip and turret handling, MEMS, burn-in and system-level test markets. It sells various products, including Delta MATRiX, Delta Pyramid, Delta Eclipse, Delta LinX, Rasco SO1000, Rasco SO2000, Rasco Saturn and Jupiter, Rasco Jaguar, Ismeca NY32, Ismeca NY20 and Delta Fusion HD. Its principal manufacturing operations are located in Malacca, Malaysia (handlers); Poway, California (thermal subsystems); Laguna, the Philippines (kits and contactors); Kolbermoor, Germany (handlers); Osaka, Japan (contactors).


Downloadable PDF version of this valuation:

ModernGraham Valuation of COHU – August 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $763,168,625 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.81 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 552.17% Pass
6. Moderate PEmg Ratio PEmg < 20 28.19 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.60 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.81 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.02 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $0.93
MG Growth Estimate 15.00%
MG Value $35.91
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $13.52
MG Value based on 0% Growth $7.93
Market Implied Growth Rate 9.84%
Current Price $26.29
% of Intrinsic Value 73.22%

Cohu, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-0.19 in 2014 to an estimated $0.93 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.84% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Cohu, Inc. revealed the company was trading above its Graham Number of $19.99. The company pays a dividend of $0.24 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 28.19, which was below the industry average of 53.7, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $5.86.

Cohu, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $5.86
Graham Number $19.99
PEmg 28.19
Current Ratio 3.81
PB Ratio 2.60
Current Dividend $0.24
Dividend Yield 0.91%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $297,506,000
Total Current Liabilities $78,151,000
Long-Term Debt $4,547,000
Total Assets $422,718,000
Intangible Assets $82,915,000
Total Liabilities $124,366,000
Shares Outstanding (Diluted Average) 29,531,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.75
Dec2017 $1.14
Dec2016 $0.11
Dec2015 $0.01
Dec2014 $0.33
Dec2013 -$1.34
Dec2012 -$0.50
Dec2011 $0.64
Dec2010 $1.02
Dec2009 -$1.20
Dec2008 -$0.23
Dec2007 $0.34
Dec2006 $0.77
Dec2005 $1.50
Dec2004 $0.76
Dec2003 $0.00
Dec2002 -$0.04
Dec2001 -$0.32
Dec2000 $1.60
Dec1999 $1.26
Dec1998 $0.58

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.93
Dec2017 $0.37
Dec2016 -$0.11
Dec2015 -$0.20
Dec2014 -$0.19
Dec2013 -$0.40
Dec2012 $0.03
Dec2011 $0.24
Dec2010 $0.07
Dec2009 -$0.19
Dec2008 $0.42
Dec2007 $0.72
Dec2006 $0.81
Dec2005 $0.68
Dec2004 $0.31
Dec2003 $0.22
Dec2002 $0.43

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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