Advanced Energy Industries is an American company that develops power and control technologies for the manufacture of semiconductors, flat panel displays, data storage products, solar cells and architectural glass. Founded in 1981, AE operates in regional centers in North America, Asia, and Europe and offers global sales and support through direct offices, representatives, and distributors. AE is in the process of transitioning the majority of its supply base to the Asian region with their main factory located in Shenzhen, China. Advanced Energy produces products that are required for the manufacture of many plasma thin-film industries including semiconductor, flat panel displays, data storage, solar cells, and architectural glass.
Advanced Energy Industries, Inc., together with its subsidiaries, designs, manufactures, sells, and supports power conversion and control products that transform power into various usable forms. It offers process power systems, including direct current (DC), pulsed DC, low frequency, high voltage, and radio frequency (RF) power supplies, as well as matching networks and remote plasma sources for reactive gas applications and RF instrumentation. The company also provides power control modules and thermal instrumentation products for rapid thermal processing, chemical vapor deposition, crystal growing, and other semiconductor and solar applications, as well as in chemical processing, glass manufacturing, and other general industrial power applications; and high voltage products for various applications, including semiconductor wafer processing and metrology, scientific instrumentation, mass spectrometry, industrial printing, and analytical x-ray systems. In addition, it offers repair, conversions, upgrades, and refurbishments services. The company markets and sells its products through direct sales force, independent sales representatives, and distributors in the United States, Europe, and Asia. Advanced Energy Industries, Inc. was founded in 1981 and is headquartered in Fort Collins, Colorado.
(Summary) (Company) (Chart)
| 13 August 2017 Price $71.17 1yr Target $78.20 Analysts 5 Dividend $0.00 Payout Ratio 0.00% 1yr Cap Gain 9.87% Yield 0.00% 1yr Tot Return 9.87% P/E 18.94 PEG 0.40 Beta 1.35 | EPS (ttm) $3.76 EPS next yr $4.60 Forward P/E 15.49 EPS next 5yr 47.40% 1yr Price Support $218.04 Market Cap $2.81 Bil Revenues $577.10 Mil Earnings $150.80 Mil Profit Margin 26.13% Quick Ratio 4.40 Current Ratio 5.10 Debt/Equity 0.00 | 1yr RevGR 16.60% 3yr RevGR 6.96% 5yr RevGR -1.32% 1yr EarnGR --- 3yr EarnGR --- 5yr EarnGR 30.81% 1yr DivGR --- 3yr DivGR --- 5yr DivGR --- ROA 26.40% ROE 38.00% |
Advanced Energy Industries Weekly Chart
Business Overview
Advanced Energy provides highly-engineered, mission-critical, precision power conversion, measurement and control solutions to our global customers. They do this by designing, manufacturing, selling and supporting power conversion products and solutions that transform power into various usable forms in various applications ranging from manufacturing and industrial processes to instrumentation and test and measurement. AE focuses on highly-engineered products that solve their customers’ toughest mission-critical applications.
The Company's process power products enable manufacturing processes that use thin films for various products, such as semiconductor devices, flat panel displays, thin film renewables, hard and industrial coatings and architectural glass. They also supply power control modules for controlling thermal processes, and thermal instrumentation products for advanced temperature measurement, both of which provide solutions for semiconductor, thin film industrial, and heavy industry. The Company's remote plasma sources are used in the thin films processing industries and in gas abatement applications. Their high voltage products offer unique power solutions for semiconductor, analytical instrumentation, industrial x-ray, and medical imaging applications. Their network of global service support centers provides revenue as they offer repair services, conversions, upgrades, and refurbishments to companies using their products.
In 2014, in connection with broadening product offerings, AE acquired all of the outstanding common stock of HiTek Power Group and UltraVolt, Inc., which together offer a comprehensive portfolio of high voltage and custom built power conversion products. These products target applications including semiconductor wafer processing and metrology, scientific instrumentation, mass spectrometry, industrial printing and analytical x-ray systems for industrial and analytical applications, as well as high voltage power supplies and modules ranging from benchtop and rack mount systems to microsize printed circuit board mount modules.
In 2014 the Company also acquired the intellectual property from AEG Power Solutions' Power Control Modules which is comprised of the Thyro-Family of products and accessories and has applications in different industries ranging from materials' thermal processing through chemical processing, glass manufacturing and numerous other general industrial power applications.
Products and Services
Advanced Energy's products are designed to enable new process technologies, improve productivity, and lower the cost of ownership for their customers. They also provide repair and maintenance services for all of their products.
In 2014, AE changed their organizational structure from two business units (formerly known as the Thin Films Business Unit and the Solar Energy Business Unit) to a single functional organization with various product lines organized as reportable segments, Precision Power and Inverters. As of December 31, 2015, the Company discontinued their Inverter production, engineering, and sales product line representing a strategic shift in the business.
AE principally serves OEMs and end customers in the semiconductor, flat panel display, high voltage, solar panel, and other industrial capital equipment markets. The Company's products are used in diverse markets, applications, and processes including the manufacture of capital equipment for semiconductor devices, thin film applications for thin film renewables and architectural glass, and for other thin film applications including flat panel displays, and industrial coatings. These markets can be cyclical in nature. Therefore, demand for the Company's products and their financial results can change as demand for manufacturing equipment and repair and maintenance services change in response to consumer demand. Other factors, such as global economic and market conditions and technological advances in fabrication processes and renewable applications can also have an impact on the financial results, both positively and negatively.
The Company's process power systems include direct current ("DC"), pulsed DC, low frequency, high voltage, and radio frequency ("RF") power supplies, matching networks, remote plasma sources for reactive gas applications and RF instrumentation. These power conversion systems refine, modify, and control the raw electrical power from a utility and convert it into power that may be customized and is predictable and repeatable.
AE's power control modules and thermal instrumentation products are used in the semiconductor industry, including adjacent thin film applications for solar PV and light emitting diode ("LED") industries, and heavy industries, for thermal control and temperature measurement solutions for applications in which time-temperature cycles affect material properties, productivity, and yield. These products are used in rapid thermal processing, chemical vapor deposition, crystal growing, and other semiconductor and solar applications requiring non-contact temperature measurement. They are also used in chemical processing, glass manufacturing and numerous other general industrial power applications.
The Company's high voltage products are designed to meet the demanding requirements of original equipment manufacturers worldwide. Their high voltage power solutions and custom built power conversion products offer high frequency, high voltage topology, providing wide input and output operating ranges while retaining excellent stability and efficiencies ranging from benchtop and rackmount systems to microsize printed circuit board mount modules. The products target applications including semiconductor wafer processing and metrology, scientific instrumentation, mass spectrometry, industrial printing and analytical x-ray systems for industrial and analytical applications.
The Company's global support services group offers in-warranty and out-of-warranty repair services in the regions in which they operate, providing them with preventive maintenance opportunities. Customers continue to pursue low cost of ownership of their capital equipment and are increasingly sensitive to the significant costs of system downtime. They expect that suppliers offer comprehensive local repair service and customer support. To meet these market requirements, AE maintains a worldwide support organization comprising of both direct and indirect activities through partnership with local distributors primarily in the United States, the People’s Republic of China, Japan, South Korea, Taiwan, Germany, and Great Britain.
Advanced Energy's products are designed to enable new process technologies, improve productivity, and lower the cost of ownership for their customers. They also provide repair and maintenance services for all of their products.
In 2014, AE changed their organizational structure from two business units (formerly known as the Thin Films Business Unit and the Solar Energy Business Unit) to a single functional organization with various product lines organized as reportable segments, Precision Power and Inverters. As of December 31, 2015, the Company discontinued their Inverter production, engineering, and sales product line representing a strategic shift in the business.
AE principally serves OEMs and end customers in the semiconductor, flat panel display, high voltage, solar panel, and other industrial capital equipment markets. The Company's products are used in diverse markets, applications, and processes including the manufacture of capital equipment for semiconductor devices, thin film applications for thin film renewables and architectural glass, and for other thin film applications including flat panel displays, and industrial coatings. These markets can be cyclical in nature. Therefore, demand for the Company's products and their financial results can change as demand for manufacturing equipment and repair and maintenance services change in response to consumer demand. Other factors, such as global economic and market conditions and technological advances in fabrication processes and renewable applications can also have an impact on the financial results, both positively and negatively.
The Company's process power systems include direct current ("DC"), pulsed DC, low frequency, high voltage, and radio frequency ("RF") power supplies, matching networks, remote plasma sources for reactive gas applications and RF instrumentation. These power conversion systems refine, modify, and control the raw electrical power from a utility and convert it into power that may be customized and is predictable and repeatable.
AE's power control modules and thermal instrumentation products are used in the semiconductor industry, including adjacent thin film applications for solar PV and light emitting diode ("LED") industries, and heavy industries, for thermal control and temperature measurement solutions for applications in which time-temperature cycles affect material properties, productivity, and yield. These products are used in rapid thermal processing, chemical vapor deposition, crystal growing, and other semiconductor and solar applications requiring non-contact temperature measurement. They are also used in chemical processing, glass manufacturing and numerous other general industrial power applications.
The Company's high voltage products are designed to meet the demanding requirements of original equipment manufacturers worldwide. Their high voltage power solutions and custom built power conversion products offer high frequency, high voltage topology, providing wide input and output operating ranges while retaining excellent stability and efficiencies ranging from benchtop and rackmount systems to microsize printed circuit board mount modules. The products target applications including semiconductor wafer processing and metrology, scientific instrumentation, mass spectrometry, industrial printing and analytical x-ray systems for industrial and analytical applications.
The Company's global support services group offers in-warranty and out-of-warranty repair services in the regions in which they operate, providing them with preventive maintenance opportunities. Customers continue to pursue low cost of ownership of their capital equipment and are increasingly sensitive to the significant costs of system downtime. They expect that suppliers offer comprehensive local repair service and customer support. To meet these market requirements, AE maintains a worldwide support organization comprising of both direct and indirect activities through partnership with local distributors primarily in the United States, the People’s Republic of China, Japan, South Korea, Taiwan, Germany, and Great Britain.
Customers
AE's products are sold worldwide to approximately 200 OEMs and integrators and directly to more than 1,500 end users. Their ten largest customers accounted for approximately 67.7% of our sales in 2016, 61.2% of our sales in 2015, and 59.7% of our sales in 2014. The Company expects that the sale of products to their largest customers will continue to account for a significant percentage of sales for the foreseeable future.
Applied Materials Inc., the Company's largest customer, accounted for 35.2% of sales in 2016, 29.8% of sales in 2015, and 29.8% of sales in 2014. Lam Research accounted for 20.7% of sales in 2016, 20.3% of sales in 2015, and 19.9% of sales in 2014. No other customer accounted for greater than 10% of our sales in 2016, 2015, or 2014. The loss of Applied Materials, Inc. or Lam Research as a customer could have a material adverse effect on our results of operations.
AE's products are sold worldwide to approximately 200 OEMs and integrators and directly to more than 1,500 end users. Their ten largest customers accounted for approximately 67.7% of our sales in 2016, 61.2% of our sales in 2015, and 59.7% of our sales in 2014. The Company expects that the sale of products to their largest customers will continue to account for a significant percentage of sales for the foreseeable future.
Applied Materials Inc., the Company's largest customer, accounted for 35.2% of sales in 2016, 29.8% of sales in 2015, and 29.8% of sales in 2014. Lam Research accounted for 20.7% of sales in 2016, 20.3% of sales in 2015, and 19.9% of sales in 2014. No other customer accounted for greater than 10% of our sales in 2016, 2015, or 2014. The loss of Applied Materials, Inc. or Lam Research as a customer could have a material adverse effect on our results of operations.
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My Path Forward
I'm very much interested in this company. Based on current fundamentals the company seems to be valued about right. But looking forward at the estimates, it starts to look extremely undervalued. Earnings growth is estimated to accelerate quickly in the years ahead. This could easily justify a price of about $90 per share a year from now and about $110 per share a year after that. That's tremendous growth from a relatively small company. It's also the kind of growth I'm always looking for.
Unfortunately I'm not the first investor to recognize this change in earnings growth going forward. One look at the chart of the company's stock and it quickly becomes obvious that investors started to push this stock higher in early 2016. As nice as the chart looks, I believe it's just the beginning of the move that could double the price of these shares within the next three years. That might not be exciting enough for some, but that's a really great return on an investment.
I plan to take advantage of this pullback that started in June and try to buy as much as I can afford before it rises about $80 per share again. I intend for this to be a semi-permanent member of my portfolio with the intent of holding the shares over a multi-year period. I believe I can obtain a very nice return of about 25-30% per year. That's the kind of money that'll fatten up my portfolio rather nicely.
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