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ams-OSRAM Is A Victim Of Its Success

Apr. 06, 2022 1:50 PM ETams-OSRAM AG (AMSSY) StockAAPL, COHR5 Comments
Mirco Lysek profile picture
Mirco Lysek


  • ams-OSRAM is fundamentally undervalued but institutional investors still look over it.
  • The integration of OSRAM is advancing as planned and some major risks are now mitigated.
  • ams-OSRAM has excellent opportunities relying on long-term growth vectors in diversified markets.
  • Once the management will establish trust again, the fair stock price is at least 58% higher than its actual level.

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Investment Thesis

ams-OSRAM is following an aggressive expansion strategy for the past 7 years, which lead to the development of key technologies and a substantial market share as a semiconductor manufacturer in the optical sensing industry. The once high-flier was mostly driven

This article was written by

Mirco Lysek profile picture
Independent trader, investment writer & financial analyst, with two decades of experience in the capital markets. Master's Degree in Management specialized in Finance, Strategy, and Marketing. It’s all about managing the risk: Being wrong is unavoidable, staying wrong is a choice. While I enjoy giving my opinion on long-term investment opportunities, my focus is oriented toward momentum and mid-term position trading, as I leverage my proficiency in fundamental analysis and combine selected quantitative metrics and theories in technical analysis.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (5)

Bill Grabowski profile picture
Dear Micro, could you write a short update to your article from last April? Your insight into AMS is excellent. Thanks.
Mirco, this is an excellent and well written piece - thanks a lot! In particular, the historic background helps to better understand the situation AMS Osram is in.

A couple of questions if I may:

In your valuation low/mid/high table, your EV formula seems to be wrong; AMS has a net debt position of USD 2.0bn and not a net cash position. Thus, EV should be higher than the marketcap, shouldn‘t it?

In your valuation have you considered that AMS needs to pay an approx. USD 55m guaranteed dividend p.a. on a perpetual basis to the outstanding 19.5% Osram minority shareholders?

Based on consensus estimates, AMS trades at a P/E of 17/13/10 for the years 2022/23/24. Your average upside estimate of some 160% would imply a P/E of 44/34/26. Would you really consider these exorbitant P/E ratios fair considering the huge debt burden, outstanding minority shareholders, no dividend/buyback program, significant capex over the next two years, potential further Apple design loss, huge integration effort for Osram, no credibility for the management, etc.? What do I miss here in the DCF vs P/E based approach? One should keep in mind that following the acquisition of Osram, AMS should probably not be valued as a chip pure play and valuations of other lightning companies (Acuity Brands, Signify) should be taken into account as well.
Mirco Lysek profile picture
Thank you @AlphaSeeeker for reading the article and for taking the time to write your valuable comments.
You are totally right in regard to the EV, there was a calculation mistake in the formula, which I now corrected. Thank you for pointing this out, which gave ma also the opportunity to find a reporting error in my valuation tables, which are now adjusted and display the corrected numbers.

As you can see, I assume a very low perpetual growth rate for a company in the technology industry. This assumption includes elements which affect the valuation of the company, but which I don’t necessarly list individually, for simplifying the model.

Personally, I totally ignore the P/E ratio as valuation metric in a company. I presented 3 situations based on different sets of assumptions, this dosen’t mean I see them equally likely. As I specified in my article, the most likely scenario in my opinion, is the “Low Valuation” scenario (now framed in green). That’s the most rational valuation I see based on the model’s assumptions.
If we consider the latest statistics for the P/E ratio by sector/industry, the forward P/E is estimated to be 66.29 in the semiconductor industry and 26.41 in the electrical equipment industry in the US. The forward P/E can then be pondered with ams-OSRAM’s business segments, which gives us a weighted average P/E of 52.33 (!!). I don’t mention the actual or trailing values which are significantly higher and an evidence of the, in my opinion, poor quality of this metric as valuation standard.

Bottom line, CHF 22.54 or $11.58 for the ADR are the values I consider as fair, IF the management achieve to establish trust among the investors, and the assumptions of my model are fulfilled.
Good coverage of an under-the-radar stock.
Mirco Lysek profile picture
@B'n'B Thank you, glad you like the article.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!


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