Ichor Q3 Earnings: Is NasdaqGS:ICHR Manipulating Earnings?

in EARNINGS/INVESTING IDEAS by

Ichor Holdings, Ltd. (NasdaqGS:ICHR) is scheduled to report Q3 earnings results after markets close for trading on November 2, 2020.

The company is expected to report earnings of $0.60/share on revenue of $225.3 million. The consensus earnings per share (EPS) of $0.60/share is based on a poll of 7 analysts and represents a growth in eps of 100.0% over the same quarter last year, when the company reported earnings of $0.30/share.

The revenue forecast of $225.3 million based on a poll of 7 analysts implies a year-over-year (YoY) growth in revenue of 45.9%. Last year the company reported $154.5 million in revenue for the quarter.

Expected to report EPS growth of 100.0% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $225.28 $154.46 45.9%
EPS $0.60 $0.30 100.0%

Earnings Call Trends

Historically, management has exceeded analyst expectations 3 out of the last 8 tracked quarters, and missed expectations 5 quarters.

What are your expectations from Ichor Holdings, Ltd. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.44 $0.54 23.9% Beat
Q1, 2020 $0.60 $0.52 −13.3% Missed
Q4, 2019 $0.50 $0.48 −3.6% Missed
Q3, 2019 $0.28 $0.30 5.9% Beat
Q2, 2019 $0.24 $0.23 −2.9% Missed
Q1, 2019 $0.26 $0.25 −4.4% Missed
Q4, 2018 $0.35 $0.32 −9.1% Missed
Q3, 2018 $0.54 $0.55 2.6% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 26, 2020, the stock price did not react much to the update.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 3, 2020 $32.82 $32.96 0.4% Increase
May 4, 2020 $22.81 $22.37 −1.9% Decline
February 5, 2020 $35.77 $34.48 −3.6% Decline
November 5, 2019 $30.98 $31.50 1.7% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −1.34, the model suggests that the company is likely an earnings manipulator. A value of −1.34 implies a 9.0% chance of earnings manipulation.

Fundamentals And Technical Analysis

Ichor Holdings, Ltd. is currently trading at $24.58/share, up 0.8% for the day. The company is trading at approximately 61.7% of its 52-week high of $39.83/share. The company’s stock price is down −25.4% since the last earnings report and up 1.2% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 60.55 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:ICHR Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 29.56 and a forward P/E multiple of 10.36.

Ichor Holdings, Ltd.’s current share price also implies a price-to-book (P/B) multiple of 2.37. The following table summarizes some other key fundamental ratios:

Data as of October 27, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 26, 2020
Stock Price (Current) $24.58
P/E Ratio 29.6x
P/E Ratio (Fwd) 10.4x
PEG Ratio 1.0
Total Debt / Total Capital 27.9%
Levered Free Cash Flow -$584 thousand
EV / EBITDA 14.2x

Finbox

Ichor Holdings, Ltd. is a small-cap stock with a market capitalization of $564.1 million and a total enterprise value of $723.7 million. The company operates in the Information Technology sector and the Semiconductors & Semiconductor Equipment industry.

Ichor Holdings, Ltd. engages in the design, engineering, and manufacture of fluid delivery subsystems and components for semiconductor capital equipment. It primarily offers gas and chemical delivery subsystems that are used in the manufacturing of semiconductor devices. The company’s gas delivery subsystems deliver, monitor, and control gases used in semiconductor manufacturing processes, such as etch and deposition; and chemical delivery subsystems blend and dispense the reactive liquid chemistries used in semiconductor manufacturing processes comprising chemical-mechanical planarization, electroplating, and cleaning. It also manufactures precision machined components, weldments, and proprietary products for use in fluid delivery systems. The company operates in the United States, Europe, Singapore, and internationally. Ichor Holdings, Ltd. was founded in 1999 and is headquartered in Fremont, California.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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