Entegris has been treading water for the past six months, recording a small loss of 2.7% while holding steady at $95.70. The stock also fell short of the S&P 500’s 16.2% gain during that period.
Is there a buying opportunity in Entegris, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Is Entegris Not Exciting?
We don't have much confidence in Entegris. Here are three reasons why ENTG doesn't excite us and a stock we'd rather own.
1. Revenue Tumbling Downwards
Long-term growth is the most important, but short-term results matter for semiconductors because the rapid pace of technological innovation (Moore's Law) could make yesterday's hit product obsolete today. Entegris’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 7.5% over the last two years. 
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Entegris’s revenue to rise by 2.2%. Although this projection implies its newer products and services will catalyze better top-line performance, it is still below average for the sector.
3. Mediocre Free Cash Flow Margin Limits Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Entegris has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 8.3%, lousy for a semiconductor business.
Final Judgment
Entegris isn’t a terrible business, but it doesn’t pass our bar. With its shares trailing the market in recent months, the stock trades at 29.7× forward P/E (or $95.70 per share). At this valuation, there’s a lot of good news priced in - we think there are better stocks to buy right now. Let us point you toward one of Charlie Munger’s all-time favorite businesses.
Stocks We Like More Than Entegris
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