Amtech Systems - An Absolute Steal

| About: Amtech Systems, (ASYS)

From a strictly fundamental valuation perspective, Amtech Systems (NASDAQ:ASYS) is currently a steal. As I will demonstrate below, ASYS is selling well below a conservative calculation of the value of its tangible assets.

Looking at some of the major the current assets...

  • Cash and Cash Equivalents: $67.4M
  • Restricted Cash: $6.6M
  • Net Property, Plant & Equipment: $12.3M
  • Inventories: $37.1M
  • Tangible Book Value: $116.8M

We can adjust inventories and net PPE based on an extreme circumstance, such as a near bankruptcy, and assume fire sale asset prices, such as 10% for inventories and 20% for Net PPE:

  • Cash and Cash Equivalents: $67.4M
  • Restricted Cash: $6.6M
  • Adj. Net Property, Plant & Equipment: $12.3M*20%=2.5M
  • Adj. Inventories: 37.1M*10%=3.7M
  • Adj. TBV: $80.2M
  • Shares out: 9.8M
  • Price (11/17/11): $8.69
  • Market Cap: $85M

Even assuming ASYS only returns 2% on its assets over the next year, we're still looking at a company that can be bought for almost entirely the cash it's inherently (and conservatively) worth. Currently, Amtech's return on assets is around 10%, making this hypothetically poor performance highly improbable.

As a bonus, how about the earnings? 25% annual earnings growth YoY for the 2006-2010 period is pretty impressive, despite lower operating margins than peers like Applied Materials (NASDAQ:AMAT) and GT Advanced Technologies (GTAT), which also dwarf ASYS.

Conclusion: a major buying opportunity for a company that has 80% of its current market value in cash.

Disclosure: I am long ASYS.

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