Ultra Clean Holdings Inc: Undervalued EV & 5G Company Reports Record Results

Analysts Look for Ultra Clean Holdings Stock to More Than Double

Ultra Clean Holdings Inc (NASDAQ:UCTT) is an overlooked 5G company that has seen its share price take an undeserved beating over the last year. As of this writing, UCTT stock is down by 37% year-to-date and 29% year-over-year.

The drubbing of Ultra Clean Holdings stock has more to do with the broader malaise of growth stocks and rising interest rates than anything happening at Ultra Clean Holdings Inc.

In February, the company reported record fourth-quarter and full-year financial results. Furthermore, management said it expects 2022 to be another year of financial growth.

Ultra Clean Holdings Inc’s recent financial results and current outlook suggest that UCTT stock should be trending significantly higher.

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Even Wall Street analysts, who are notoriously conservative, are on board. Their average 12-month share-price forecast for Ultra Clean Holdings Inc is $71.50, and their high estimate is $85.00.

This points to potential gains of 100% to 137%. Even the low estimate of $53.00 points to a possible gain of 47% from Ultra Clean Holdings stock.

Chart courtesy of StockCharts.com

About UCTT Stock

Hayward, CA-based Ultra Clean Holdings develops subsystems, components, parts, ultra-high purity cleaning services, and analytical services for the semiconductor industry. (Source: “Investor Presentation: Spring 2022,” Ultra Clean Holdings Inc, last accessed April 20, 2022.)

Under its Products division, the company provides an integrated outsourced solution for major subassemblies, improved design-to-delivery cycle times, designs for manufacturability, prototyping, advanced flow control solutions, and high-precision manufacturing.

Under its Services division, Ultra Clean Holdings Inc offers tool chamber parts cleaning and coating, as well as micro-contamination analytical services. The company’s “ChemTrace” system identifies contamination risks in fabrication clean rooms, while its “QuantumClean” process enhances the lifespan of production equipment.

Through both divisions, Ultra Clean Holdings Inc’s total addressable chip market is $585.0 billion. And with the high demand for semiconductors in advanced technology sectors like 5G, electric vehicles (EVs), and smart homes, the company’s technology has become even more indispensable.

Record Q4 Revenue & Earnings Per Share

For the fourth quarter ended December 31, 2021, Ultra Clean Holdings announced that its revenue increased by 66% year-over-year to a record $615.1 million. (Source: “Ultra Clean Reports Record Fourth Quarter and Full Year 2021 Financial Results,” Ultra Clean Holdings Inc, February 23, 2022.)

The company’s fourth-quarter net income more than doubled to $45.4 million, or $1.00 per share. Its adjusted net income advanced to $1.22 per share from $1.07 per share in the same prior-year period.

Ultra Clean Holdings Inc reported record full-year cash flow from operations and earnings per share.

The company’s full-year 2021 revenue climbed by 50% to $2.1 billion. Its net income went up by 54% to $119.4 million, or $2.69 per share. The company’s adjusted earnings were $186.1 million, or $4.20 per diluted share—a 61% improvement from the 2020 adjusted earnings of $115.0 million, or $2.80 per share.

“Record fourth quarter performance propelled UCT over the $2 billion revenue milestone for the year and represents a strong endorsement of our execution capabilities on every level,” said Jim Scholhamer, Ultra Clean Holdings Inc’s CEO. (Source: Ibid.)

He added, “We expect 2022 to be another year of growth and believe we are ideally positioned to meet ongoing demand.”

For the first quarter of 2022, Ultra Clean Holdings Inc expects to report:

  • Revenue in the range of $580.0 to $630.0 million, which at the midpoint represents a year-over-year gain of 45%
  • Net income per share in the range of $0.80 to $1.00, up from $0.60 in the first quarter of 2021
  • Adjusted net income per share in the range of $1.06 to $1.26, compared to $0.92 in the first quarter of 2021

Analyst Take

What’s not to like about Ultra Clean Holdings Inc? The company has a vast global footprint and a growing total addressable market. Moreover, it’s working on ramping up its output in 2022.

Ultra Clean Holdings Inc recently reported record financial results, with its fourth-quarter earnings more than doubling and its full-year income rising by 61%. The company also provided strong first-quarter 2022 guidance, expecting its revenue to climb by 45% and its earnings per share to advance 50%.

All that means Ultra Clean Holdings stock could be on its way up.