GT Advanced Technologies (GTAT) has seen its share price rising over the past six months, and its financials have been in line with the raise in the stock price. However, of greater importance is the optimistic market conditions that are projected for the coming years that could greatly benefit GT Advanced Technologies provided it takes correct advantage of its capabilities and reaps from the growing market.
GT Advanced Technologies is a New Hampshire based American company founded in 1994 that provides crystal growth capabilities and solutions for the LED (light emitting diode), solar and electronics industry both in America and internationally. The company's chief segments include Sapphire, photovoltaic and Polysilicon.
GT Advanced Technologies in the market today
GT Advanced Technologies' share closed at a price of $8.38 per share, experiencing a gain of 0.42% from an opening share price of $8.34. The stock is currently trading at 20.45x of its annual future earnings projected for the next year, with a current market capitalization of $1.01 billion. The company's stock has experienced a 53.76% gain over the past one year and is currently trading at the year's highest share price, which was $8.48 on 24th September 2013. The current stock valuation together with the high PEG (5 yr expected) of 6.36 shows that the stock is overvalued and is destined to decline in the future, as it suggests that investors are actually paying much higher for the earnings that the company is generating. However, whether or not that is the case would be concluded on the basis of the various factors contributing to the industry and prevailing in the market.
GT Advanced Technologies has witnessed a growth in revenues over the past three years, with its revenues increased from $0.54 billion in FY2010 to $0.95 billion in the fiscal year ending March 31st 2012. The company shifted its year end from March to December in 2012, which makes the following fiscal year 2013 incomplete for a comparative analysis due to its duration of only nine months. The company's quarterly revenue increased by 0.644% year-over-year from $0.167 billion in the first quarter (ending June) of 2012 to $0.168 billion in the second quarter (ending June) of 2013.
GT Advanced Technologies' EPS has seen a positive growth over the past year as its EPS increased from $0.41 per share in June 2012 to $0.78 per share in June 2013, growing by 90.2% year-over-year. The company's spending on research and development has increased. However, the company's cash position has declined from $0.42 billion to $0.29 billion in the six months from December 2012 to June 2013.
Opportunities in the market
The LED industry holds ample promise for all related companies as the LED lighting sector is projected to grow exponentially over the coming years. According to a report by McKinsey, the LED technology would be used for 70% of the lighting done around the world by the year 2020. All related industries are said to benefit from the growth in the LED industry, thus GT Advanced Technologies being a component provider for the production of LEDs could make huge market and monetary gains from the growth of this sector.
GT Advanced Technologies' sapphire segment can be regarded as one set to benefit the company largely in the future as sapphire is employed not only in the LED industry (for the production of LED controller chips) but also a glass that has huge potential to be used in the electronics of tomorrow. GT Advanced Technologies is the largest Sapphire equipment supplier currently, with its Sapphire furnaces which gives it ample opportunity to benefit from the Sapphire related growth prospects in the industry.
Sapphire, or Sapphire coated glass is said to be better at resisting breakage or shattering upon impact as compared to Corning's (GLW) Gorilla Glass. This could greatly benefit GT Advanced Technologies as it could become an active part of the growing smartphone and handheld market in the event that the stronger Sapphire coated glass gets replaced by Corning's Gorilla Glass used in most of the advanced handheld devices of today. One drawback for the technology could be the high cost associated with the production of the Sapphire glass screen as compared to Corning's Gorilla glass. However, this cost could be reduced by using Sapphire coating on glass in order to render strength instead of creating the entire glass screen of Sapphire, which could greatly reduce the cost and price of the Sapphire glass screen and thus much more comparable to that of the Corning's Gorilla Glass.
The third segment of GT Advanced Technologies, the photovoltaic segment which directly contributes to the solar power generation industry, has also been recently been projected for high growth in the coming years after the solar power industry suffered from stagnation and low demand over the past two years. The recent rise in fuel prices has triggered the solar power generation industry, as the market aims for cheaper and more efficient power generation options.
It can thus be safely inferred that the current market conditions benefit GT Advanced Technologies in not just a single segment of the business, but all three. Thus GT Advanced Technologies is a good buy even though its high P/E or a high PEG ratio of 6.36 could indicate otherwise. The current market conditions as well as the projections for the sectors that the company operates in could play positively for the company, however, that also calls for prudent and quick responses by GT Advanced Technologies if it aims to benefit from the situation. GT Advanced Technologies holds larger gains in the longer run and thus could to a larger extent benefit the investors that plan on keeping a long position in the company's stock.