Founded in 1968, Tempe-based Amkor Technology, Inc provides outsourced semiconductor packaging and test services in the U.S., Japan, Europe, the Middle East, Africa, and Asia Pacific. Over the past 60 years it has grown to employ over 31,000 people with revenue exceeding $7 billion per year.
Over the last decade revenue has increased from $2.7 billion to the previously noted $7 billion, a compound annual growth rate of 10%. Over the same period earnings have skyrocketed from $42 million to $766 million -- an increase of nearly 20 fold -- compounding at an astounding 34% per year.
Sounds great so far, let's go all in!
Not so fast. While it's P/E of 8 is far from expensive, its projected growth of 7% is, in addition to being far below its historical average, not high enough to make a P/E of 8 look fantastic. It is high enough to make it look good. So, still a buy, right?
Well... the company's earnings are expected to fall this year and next, and revenue is expected to drop this year as well. And then there's the estimate revisions. Down. All down. This quarter's EPS was expected to be $0.53 3 months, ago, but that has plummeted to $0.18 now. Next quarter's estimate has also dropped precipitously, falling from $0.63 to $0.30. The estimate for the year has not fared as bad, but it's still down: $2.81 to $2.38. Next year has suffered the same fate; while the estimate was $3.25 90 days ago, it is only $2.83 now.
Even if we were getting a phenomenal deal on this company these revisions would be very concerning; given that a P/E of 8 is merely good, not phenomenal, we're gonna have to pass on this one.
But that doesn't mean we have to walk away empty-handed. Hub Group, Inc (HUBG), based in Illinois, was founded in 1971 and has grown to employ almost 6000 people. The company is a supply chain solutions provider, offering transportation and logistics management services in North America, with its fleet of 2300 tractors, 750 independent owner-operators, 4600 trailers, 48,000 dry containers, and 750 refrigerated containers.
Over the past decade the company's earnings have soared from $68 million to $356 million, an annual compound growth rate of 18%. The last five years have seen that growth accelerate to 21%. Hub Group started with a 2% net margin back in 2012, but has triples it to over 6% in 2022. It has grown ts return on equity from a respectable 13% to an impressive 22%.
The company's has revenue has only grown 5.5% per year -- the P13 method usually holds out for at least 7%. But with a P/E of only 8, and growth projected to be 16% per year in the coming years, we can accept a minor imperfection; Hub Group will be added to the P13 portfolio.
DISCLOSURE: I do not currently own the stocks indicated but I plan to buy some within 24 hours. This is not a recommendation to buy; do your own research, and plan any stock purchases with the help of a financial advisor and an eye towards your appetite for risk and your own unique financial circumstances.
Bought 6 shares @ $86.01, sold @ $79.80 on 6/16
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