SMTX stock (SMTC Corporation) analysis, prediction, valuation

Today (December 14th) I added SMTX stock to my portfolio. There are a few reasons which attracted me to this stock.


SMTX Stock Overview: company, category description

SMTC Corporation provides electronics manufacturing services in the United States, Canada, and Mexico. The company offers end-to-end electronics manufacturing services, including product design and engineering; printed circuit board assembly; production, enclosure, cable assembly, and precision metal fabrication; systems integration and testing; and configuration to order, build to order, and direct order fulfillment services. It provides integrated contract manufacturing services to original equipment manufacturer, technology companies, and governmental entities primarily in the test and measurement, retail and payment systems, telecom, networking and communications, medical and safety, industrial, power and clean technology, semiconductor, avionics, defense, and aerospace market sectors.

The chart for SMTX stock is showing a very interesting pattern forming a 2-year long cup on a weekly chart. Now, this is just a cup, no handle, but looks promising


Zooming into daily for SMTX stock we can see 2 things happening:

  1. A good run on the solid 4-day volume after the latest earnings report.

  2. A nice price action today with the price bouncing off the previous resistance level.



SMTX Stock Financial overview


Sales for SMTC Corporation were accelerating nicely over the past few years. They did go into a bit flat territory in 2020 due to COVID, but the good thing they did not decline as many other companies. Analysts predict the sales will resume growth in 2021.

Source: https://simplywall.st/stocks/us/tech/nasdaq-smtx/smtc



With increasing sales, EPS for SMTC Corporation are expected to continue to grow (on a positive note they have already climbed strongly from the red zone). Current EPS stands at $0.14 which gives the stock a PE ratio for SMTX stock of 32. Analysts predict EPS for the end of 2021 of 0.48 at which point PE will stand at (using current price) under 10.



Why do I think SMTC Corporation will continue to grow revenues?


In the most recent Investor presentation that happened in November 2020, SMTC Corporation highlighted a number of great points including projected revenue growth of 15-20% in the next few years.


Source:

https://d1io3yog0oux5.cloudfront.net/_8dd2701743da1a3d9c3882f194b8d697/smtc/db/500/4604/pdf/SMTC+IR+slides+Q3+2020+11.4.20+final.pdf



SMTX Stock Key financial ratings/Stock Value


As mentioned above, the current PE for SMTX stock is around 32. With the predicted growth in EPS to $0.48 by the end of 2021 and using the current price for SMTX stock of $4.43, this would give us a forward PE of just 9.3. Such growth and low price provide for a stellar PEG (Price-to-Earnings Growth) ratio of just 0.3. Just to remind anything below 1 is considered to be a good value for the expected growth.

The average PE ratio for the US Electronic industry average is 25.5. Even if we use a modest PE of 20, the stock should be priced around $0.48 x 20 = $9.6 which would mean 116% growth.


SMTX Stock Analytics Predictions


Based on 2 analysts offering 12-month price targets for SMTX Stock the average price target is $7.

https://www.marketwatch.com/investing/stock/smtx/analystestimates?mod=mw_quote_tab


Zacks gives the stock a rank of 2 and A scores across all their key performance indicators for SMTX stock:

Source: https://www.zacks.com/stock/quote/SMTX?q=SMTX



SMTX Stock Ownership by Institutions


For now, institutions and hedge funds own only 27% of the shares of the company. However, they have recently been picking more shares as seen below.


Source: https://simplywall.st/stocks/us/tech/nasdaq-smtx/smtc

Source: https://www.nasdaq.com/market-activity/stocks/smtx/institutional-holdings



Disclaimer: I own SMTX stock. I do not suggest you should buy any of the stocks I write about. As usual, please do your own due diligence before investing your own money in any of the stocks I write about. The above analysis is quite basic and just gives ideas for further research. A much deeper analysis is required for each stock, including the analysis of operations, debt, etc. I may sell any of the stocks I say I currently own at any moment before it reaches the targets that I set or keep them for even when they reach the target.

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