Rudolph Technologies Inc. - Value

Rudolph Technologies, Inc. (RTEC) is cashing in on semiconductor demand as revenue rose 124% in the third quarter. Shares are cheap, trading at just 8.8x forward estimates.

Rudolph Technologies doesn't manufacture semiconductors but it develops defect inspection systems, process control metrology and data analysis systems and software used by the semiconductor manufacturers.

The New Jersey-based company's yield management solutions are used in LED and Solar as well as wafer processing and final manufacturing of ICs.

Just Received Multiple Back-end Orders

On Jan 11, the company announced it had received multiple orders for its NSX Inspection System from a major European semiconductor manufacturer.

The equipment will be used to inspect automotive semiconductor devices which are subject to large variations in temperature, humidity and mechanical stress. Semiconductors are now found in nearly every major automobile subsystem including emissions, control, audio, comfort and safety.

Rudolph Beat By 15.4% in the Third Quarter

On Nov 1, Rudolph Technologies reported its fourth consecutive earnings surprise. Earnings per share were 30 cents compared to the Zacks Consensus of 26 cents per share.

Revenue soared 124% to $52.3 million from $23.3 million in the year ago quarter as strong front-end and software sales boosted the quarter. International sales represented 82% of total revenue with domestic sales at just 18%.

Front-end semiconductor customers were 66% of revenue with back-end the remaining 34%.

Gross margin rose to a historical high of 56%, up from 41% in the third quarter of 2009, primarily due to higher revenue, higher average selling prices and lower reserves as inventory was better utilized.

Double Digit Growth Expected in 2011

The company has come through the dark days of 2009 when it lost 56 cents per share. Earnings are expected to be 87 cents in 2010, an increase of 255%.

But analysts are also optimistic about 2011. Earnings are expected to grow another 30.2% to $1.13 per share. 1 estimate was revised higher for 2011 in just the last week.

Value Characteristics

Rudolph doesn't just have a low P/E it also has a low price-to-book of 1.8, which is well within the range of a value stock of under 3.0.

With the double digit earnings growth and the low P/E, it has a PEG ratio of just 0.4, which makes it both a value and a growth stock.

The company also has a solid 1-year return on equity (ROE) of 11.5%.

Rudolph Technologies is a Zacks #1 Rank (strong buy) stock.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 
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