Rudolph Technologies Stock: A Steady Long-Term Performer Set to Break Higher

rudolph technologies stock
iStock.com/Tinnakorn Jorruang

Rudolph Technologies Set for Higher Moves

Technology and small-cap stocks have been sizzling, with record moves by the Nasdaq and Russell 2000.

The best part is that the momentum and relative strength looks bullish, which could continue to offer additional lift for small-cap technology companies like Rudolph Technologies Inc (NYSE:RTEC).

The company provides proprietary manufacturing solutions that help manufacturers of microelectronics, including semiconductor and advanced packaging device companies.

Rudolph Technologies solutions aid companies to become more efficient in the manufacturing phase and cut the lead time to bring the product to buyers.

RTEC stock is outperforming the NASDAQ and Russell 2000, advancing 29% this year and 38% over the past year.

And, based on its price chart, RTEC stock has been breaking higher from multiple sideways accumulation channels. Now it appears to be lining up for another upward break.

Chart courtesy of StockCharts.com

My Fundamental Bull Case for RTEC Stock

Rudolph Technologies is a steady grower of revenues, with sequential increases in four straight years.

Revenues increased from $176.2 million in 2013 to $255.1 million in 2017, representing a compound annual growth rate (CAGR) of 9.7%.

Year Revenue (Millions) Growth
2013

$176.2

2014

$181.2 2.8%
2015 $221.7

22.3%

2016

$232.8 5.0%
2017 $255.1

9.6%

The positive revenue trend for Rudolph Technologies is expected to increase to 16.5% (to $297.15 million) in 2018, which would represent the company’s second-biggest growth rate in five years. (Source: “Rudolph Technologies, Inc. (RTEC),” Yahoo! Finance, last accessed June 8, 2018.)

For 2019, revenue growth could moderate to 7.1% (or to 11.8%, based on the high estimate of $331.9 million).

Rudolph Technologies is managing to do a good job in controlling its cost structure and deliver generally accepted accounting practices GAAP profits in four of the past five years.

The key earnings before interest, tax, depreciation, and amortization (EBITDA) has risen in three straight years from $8.3 million in 2014 to $50.7 million in 2017.

Year

EBITDA (Millions) Growth
2013

$13.0

2014

$8.3 -36.6%
2015 $38.7

368.2%

2016

$43.5 12.4%
2017 $50.7

16.5%

Looking ahead, the earnings estimates have been rising for Rudolph Technologies, which is a bullish confirmation of growth—and potentially higher share prices.

For 2018, Rudolph Technologies is estimated to increase earnings by 54% to $1.86 per diluted share, followed by a possible 22% increase, based on the high estimate of $2.27 per diluted share for 2019.

A bonus is the strong balance sheet, with no debt and $178.0 million ($5.61 per share) in cash.

The free cash flow (FCF) for Rudolph Technologies has increased in four straight years. The FCF was a mere $1.2 million in 2013 prior to launching to $54.2 million in 2017.

Year

Free Cash Flow (Millions) Growth
2013 $1.2

2014

$2.2 84.2%
2015 $30.4

1,276.9%

2016

$43.3 42.4%
2017 $54.2

25.0%

Analyst Take

The multiple for Rudolph Technologies stock is expected to improve to 16.8-times the consensus 2019 earnings per share (EPS), versus 33-times trailing EPS. Based on the high estimate, the multiple could fall to as low as 14.1-times.

Assuming a multiple expansion to 20-times, this implies an approximate price of $45.00 for RTEC stock.