February 26, 2018

ICHR – While management’s concerns about their consumer base, acquisitions, and guidance suggest near-term upside may be limited, overly bearish market expectations support longer-term upside


    • Ichor Holdings, Ltd. (ICHR:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 9.2x Uniform P/E, implying bearish expectations for the firm. As such, while management’s negative sentiment suggests the potential for near-term headwinds, longer-term upside remains warranted
    • Specifically, management may lack confidence in their ability to expand their customer base and may also lack confidence in their gross margin guidance. Additionally, they may be exaggerating the customer-facing activity synergies they can harvest from their new acquisitions and may be downplaying concerns about potential seasonality in Q3. However, market expectations are for Uniform ROA to fall to levels not seen since the firm has gone public, implying longer-term upside remains justified should the firm be able to maintain Uniform ROA at or near current levels

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