Photon Control (PHO.TO)

About a 30% revenue growth this year and a 10%-11% for the next 2 years after. Provides sensing technology for semiconductor companies, so in a derived kind of play you can enjoy the growth of the semiconductor industry with Internet of things. Everything has a chip now, and it should trickle down to this company. They’ve had some issues in the past. A new CEO has come in. About 20% of their market cap is in cash, and thinks the CEO will eventually do something with it to generate value for their shareholders.

He screens for companies that have a high ROE, and this company came through. It looks like they have come off a little from their recent highs, so this may be a good entry point.

Etching on semiconductors. One of the only pure play semiconductor companies in Canada. They are sitting on a lot of cash. Revenues are going up at a 70% growth rate range. They had a tough year last year, but they have fixed all those issues and it is a 15X earnings stock with very high growth. (Analysts’ price target is $2.)

A technology company that works in the semiconductor space doing etching. (Only 1 analyst follows.) Has a pristine balance sheet. 25% of the market cap is in cash. Has a good backlog over the next number of quarters. Reporting in about a week or so, and expects them to have an all-time record of top line revenue. (Analysts’ price target is $2.)

This does optical measurement for semiconductor manufacturers and others. Its been a bit of a wild ride on the news level. There is a sister company called Photon R&D. Some funds left this company and went into the R&D when they weren’t supposed to. They got that money back and now there is litigation between the 2 companies. There was a press release that the litigation had been settled, and then about 2 hours later came out with a disclaimer on the news. Investors just recently replaced management, which was followed by news that litigation had been settled. The deal looks good for both parties. Thinks the company has been significantly de-risked now. Strong balance sheet and a decent valuation, with some good growth potential.

This makes stuff that makes stuff, particularly in the semiconductor space. Their key is extremely precise temperature and measurement pieces. Extremely profitable with a large free cash flow generation. Also, has a lot of cash on the shelf. They may end up acquiring something, or they may be acquired. They are dealing with 4 of the 5 large semiconductor makers. Thinks they have now signed the 5^th giving them all of them, and they continue to try to get greater market share within those 5. The latest earnings results for a couple of their clients has been quite positive. Earnings are expected to be $.09 against $1.29, and he thinks there is still pretty good opportunity for the stock going forward.

Financials are incredible. Earnings are forecast to be $.08 in 2017, so it is trading at less than a 10X multiple. A monster free cash flow generator. They provide optical sensors and temperature measurements on an extremely precise basis, particularly in the semiconductor space. Although people have concerns about semiconductors being a cyclical business, he thinks there is still lots of legs in that space. The stock is cheap. They are looking for potential acquisitions to use up some of their cash. Overall a great product.

(Market Call Minute.) This continues to have specialized measurement. A huge free cash flow generator. There has been a change in management. The underlying business continues to do well. They have the cash, and there is a question as to whether they will be acquiring something that is profitable.

(Market call Minute) They have a big bundle of cash and are looking to acquire something. It is a very cyclical business and if it turns out people aren’t buying as many smart phones then it will be a challenge for them.

A really interesting little company that he has had his eye on for a while. From a valuation standpoint, it is pretty cheap. Have a great ROE and great EBITDA margin. The big knock against them is that they have a very high concentration in a couple of clients. He would like to see that diversified, so that they if they lose one of their clients it won’t be such a big hit to the business.

Basically specialize in measurement for the semiconductor industry, and are making a bucket of money. Have about 5 big customers and getting larger sales with a new customer that they recently added. Massively free cash flow positive. Have a ton of cash on the balance sheet, and the question is what they are going to do with it. The industry is notoriously cyclical. Thinks there is still a great opportunity going forward. This is one to watch. Very profitable, inexpensive and growing very quickly.

Company is making decent money. Year-over-year sales growth is up 90%, and earnings growth is up 150%. Trades at a 6X Enterprise Value to EBITDA with a 32% ROE. An interesting small-cap company that looks like it still has good growth opportunities.