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Axcelis: A Canslim Analysis

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Legendary maturation banal advocator William J. O'Neil developed a celebrated model for uncovering stocks apt to admit by respective 100 percent. He dubbed his method nan easy-to-remember acronym "CANSLIM" (aka CAN SLIM and canslim). Canslim indicates various desirable attributes to look for successful maturation stocks. Axcelis Technologies, Inc. (NASDAQ:ACLS) successful my position passes nan canslim trial and is suitable for finance anyplace astatine nan existent value of ~$120/share.

Background

Axcelis designs, manufactures, and services ion implantation instrumentality utilized successful nan fabrication of semiconductor chips successful nan U.S., EU, and Asia. The patient sells implanters for a assortment of power and existent specifications and provides aftermarket support specified arsenic utilized tools, spare parts, instrumentality upgrades, maintenance, and training.

In its most caller investor presentation, Axcelis Technologies, Inc. lists 3 fundamentals supporting continued growth. These factors are nan electrification of nan automotive industry, nan emergence of nan Internet of Things ("IoT"), and geographical fab description s driven by de-globalization and authorities incentives. The emergence of nan physics conveyance ("EV") and nan Internet of Things are driving full addressable marketplace ("TAM") description for nan Purion powerfulness instrumentality and image sensor series, which are immoderate of Axcelis' highest separator tools. Axcelis' main competitor is Applied Materials, Inc. (AMAT), which is simply a ~$100B diversified semiconductor institution not solely focused connected ion implantation. Let's reappraisal nan institution done nan "CANSLIM" lens.

C. Current Big aliases Accelerating Quarterly Earnings and Sales per Share

The "C" successful canslim stands for existent quarterly results. Bill O'Neil wanted to see, "a awesome percent summation successful existent quarterly net per stock (the astir caller reported quarter) erstwhile compared to nan anterior year's aforesaid quarter." O'Neil himself highlighted Priceline stock, which astatine that clip had net increases of 34%, 53%, 107%, past 126% while its banal value climbed from $30 to $140.

Axcelis' has reported maturation rates of 154%, 140%, 49%, and 64% complete nan past 4 quarters. Furthermore, Bill insists connected income maturation of astatine slightest 25% for nan latest quarter. On 2/8/23, Axcelis reported Q4 gross of $266.1M, a 29.4% YoY maturation rate. It's important to statement that nan company's backlog of undelivered orders and deferred gross is growing, not shrinking, meaning bookings are strong. Specifically, complete nan past 8 quarters nan backlog has grown from $186.5M to greater than $1.1B. This backlog description will support early net growth. Axcelis gets a thumbs up for nan "C" criteria of canslim.

A. Annual Earnings Increases: Look for Big Growth

The "A" successful canslim stands for yearly results. Bill recommends selecting stocks pinch 25% to 50% and higher yearly net maturation rates. The past 3 years of Axcelis' yearly net maturation rates are 90% successful 2022, 97% successful 2021, and 192% successful 2020. Bill besides notes that investors should look for a precocious return connected equity. His studies show that astir each nan top maturation stocks of nan past 50 years had ROEs of astatine slightest 17%. Axcelis sports an ROE of 30%.

Bill makes a secondary constituent astir nan misuse of P/E ratios. He states:

"From 1953 to 1985, nan mean P/E for nan best-performing stocks astatine their early emerging shape was 20. From 1990-1995 nan existent leaders began pinch an mean P/E of 36 that expanded into nan 80s. Beginning P/Es for astir large winners ranged from 25 to 50, and nan P/E description s varied from 60 to 115."

Axcelis' ttm P/E ratio is 23, hardly worrisome for a maturation stock. Axcelis gets a thumbs up for nan "A" criteria of Canslim.

N. Newer Companies, New Products, New Management

The "N" successful canslim stands for caller companies, products, and/or management. Axcelis is not a caller company, having been nationalist for 23 years, but location is important alteration going connected nether nan surface. The marketplace regards Axcelis arsenic a cyclical banal tied to representation cycles, but nan institution is genuinely focused connected mature process exertion and is apt to proceed to turn done nan 2023 manufacture downturn.

Importantly, nan powerfulness instrumentality marketplace is showing gangbusters maturation owed to nan electronification of nan automobile. Axcelis expects complete 55% of systems gross successful 2023 to beryllium from powerfulness devices, pinch greater than 50% of that 55% coming from silicon carbide (as opposed to conscionable silicon) applications. In nan Q4 2022 net call, guidance estimated that Silicon Carbide wafer starts will double each 3 years driven by nan automotive market. Management besides called Axcelis:

"the only ion implant institution that tin present complete look sum for each powerfulness instrumentality applications… Axcelis is considered by powerfulness instrumentality customers to beryllium nan exertion leader of choice, providing nan champion merchandise family and manufacturing capabilities."

In nan Q4 2022 net call, Axcelis unveiled a exemplary PnL that could beryllium achieved arsenic soon arsenic 2024. Needham expert Quinn Bolton estimated that if successfully achieved, nan institution would make almost $9 successful EPS. Axcelis gets a thumbs up for nan "N" criteria of canslim owed to nan caller secular maturation successful SiC implant driven by image sensors and nan powerfulness instrumentality market.

S. Supply and Demand: Big Volume Demand astatine Key Points

The less shares outstanding and nan smaller a company's marketplace cap, nan little buying powerfulness it takes to make nan value per stock appreciate. Since 2018, Axcelis has hovered astir 34M shares outstanding and sports a existent marketplace headdress of $4B. Over nan people of 2022, nan institution repurchased $57.5M of shares, bringing superior returned to shareholders to complete $132M since 2019. If nan institution decides to allocate superior to repurchases much aggressively, nan shares outstanding could shrink importantly complete nan coming years.

The only facet to statement is that guidance has made clear they are evaluating M&A opportunities extracurricular of nan implant market, and if they determine to prosecute a target that costs supra ~$400M, they mightiness rumor shares to money nan transaction. Axcelis gets a thumbs up for nan "S" criteria of canslim.

L. Leader aliases Laggard: Which is Your Stock?

O'Neil's investigation indicates that you should bargain among nan champion 2 aliases 3 stocks successful a group. He indicates you should cipher this by looking astatine nan RSI. As of 2/20/23 Investor's Business Daily, nan institution O'Neil founded, rates ACLS number two successful nan semiconductor instrumentality group. IBD besides awards Axcelis a comparative spot standing of 98. To put this successful perspective, O'Neil recovered from 1950 to 2008 nan mean RSI of large winners earlier they began their awesome run-up was 87. Axcelis gets a thumbs up for nan "L" criteria of canslim.

I and M: Not Valuable

The I and M successful canslim guidelines for organization sponsorship and marketplace direction. These are insignificant concerns that are either not valuable aliases not determinable.

Conclusion

Axcelis Technologies, Inc. is nan best-in-breed maturation banal trading astatine a reasonable multiple. The net maturation has been stellar complete nan past fewer years and should proceed arsenic respective factors accelerate nan maturation of nan implant TAM. There are nary clear competitors successful sight, and nan institution trades astatine a reasonable aggregate while it continues to turn done nan expected 2023 representation downturn.

Axcelis meets Bill O'Neil's standards erstwhile viewed done his canslim lens. Axcelis Technologies, Inc. is simply a maturation banal investors should bargain astatine nan existent value of ~$120/share.

This article was written by

Growth Stock Prospector floor plan picture

In nan micro, small, and mid headdress spaces I attraction connected uncovering equities that use from a tailwind trend, and tin use from a marketplace re-rating.

Disclosure: I/we person a beneficial agelong position successful nan shares of ACLS either done banal ownership, options, aliases different derivatives. I wrote this article myself, and it expresses my ain opinions. I americium not receiving compensation for it (other than from Seeking Alpha). I person nary business narration pinch immoderate institution whose banal is mentioned successful this article.

Editor: Naga



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