CyberOptics Corporation: Great Time for This Rebounding Semiconductor Stock

CyberOptics Stock Could Boom Under Biden

The current semiconductor shortage that has engulfed the world has been impacting everything from low to advanced technologies.

While negative in the short term, the shortage has driven the U.S. to build up its domestic microchip industry. The Joe Biden administration will spend $50.0 billion to build domestic semiconductor production capacity.

To play what will be bullish tailwinds for the semiconductor sector, I like the risk/reward ratio in CyberOptics Corporation (NASDAQ:CYBE).

The company provides advanced 3D sensing technology to improve chip manufacturing yields and productivity in the surface mount technology and semiconductor fabrication markets.

Advertisement

CyberOptics Corporation is relatively tiny, with a mere market cap of $257.0 million, but CYBE stock could return some major gains if the company can execute its strategy.

The stock market has rewarded CyberOptics stock to the tune of a 55% gain this year, including 28% over the past month. My view is that there are plenty more gains to come under the country’s new direction.

The below chart shows CYBE stock in a bullish rounding bottom formation on strong relative strength, as well as the emergence of a golden cross pattern in June (a technical pattern in which the 50-day moving average breaks above the 200-day moving average).

This suggests that more gains are on the horizon, back toward $40.00.

Chart courtesy of StockCharts.com

Revenues Are Powering Profitability for CYBE Stock

A look at CyberOptics Corporation’s five-year revenue picture shows inconsistency, but the company delivered an 18.3% jump to $70.1 million in 2020, the highest revenue it recorded in five years.

Fiscal YearRevenues (Millions)Growth
2016$66.2N/A
2017$53.3-19.5%
2018$64.721.4%
2019$59.3-8.4%
2020$70.118.3%

(Source: “CyberOptics Corp.” MarketWatch, last accessed June 11, 2021.)

Moreover, CyberOptics has been attracting upside revisions to its revenue estimates. Analysts expect the company’s revenues to increase by 14.6% to $80.4 million this year and by 11.1% to $89.3 million in 2022. (Source: “CyberOptics Corporation (CYBE),” Yahoo! Finance, last accessed June 11, 2021.)

CyberOptics recorded five straight years of earnings before interest, taxes, depreciation, and amortization (EBITDA) income.

Fiscal YearEBITDA (Millions)Growth
2016$8.3N/A
2017$3.3-60.1%
2018$5.977.5%
2019$4.6-21.5%
2020$5.926.5%

(Source: MarketWatch, op. cit.)

The company also recorded five straight years of generally accepted accounting principles (GAAP) earnings-per-share (EPS) profits.

Fiscal YearGAAP Diluted EPSGrowth
2016$1.64N/A
2017$0.19-88.4%
2018$0.39106.4%
2019$0.11-72.8%
2020$0.77622.6%

(Source: MarketWatch, op. cit.)

CyberOptic’s profitability is expected to continue to edge higher. Analysts estimate that the company will earn $0.93 per diluted share in 2021 and $1.17 per diluted share in 2022. (Source: Yahoo! Finance, op. cit.)

Meanwhile, CyberOptics Corporation has generated positive free cash flow in the last three years, including a 358.8% surge to a four-year high in 2020.  

Fiscal YearFree Cash Flow (Millions)Growth
2016$7.8N/A
2017-$3.7-147.1%
2018$2.1158.4%
2019$1.1-46.8%
2020$5.2358.8%

(Source: MarketWatch, op. cit.)

As far as the company’s financial condition goes, there are no immediate issues. CyberOptics has strong working capital, debt of $3.9 million, and cash of $18.7 million. (Source: Yahoo! Finance, op. cit.)

Analyst Take

In addition to the growth and opportunities in the semiconductor space, CyberOptics Corporation has decent institutional support. About 108 institutions hold a 64% stake in CyberOptics stock. (Source: Yahoo! Finance, op. cit.)

Looking at the company’s expected earnings growth, its outlook is bullish. CyberOptics has a forward expected five-year compound annual growth rate (CAGR) of 25%, which is a major improvement from the past-five-year CAGR of -51.2%.

In my view, CYBE stock is attractive at its current price, and if things pan out, it could rally to much higher levels.