Cohu vs. ACM Research: Which Semiconductor Equipment & Materials Stock is a Better Buy?

With the global chip shortage still wrecking havoc, many semiconductor companies are benefiting from higher stock prices. While the big companies ate getting all the attention, there are a few smaller semiconductor firms worth a look. This includes Cohu (COHU) and ACM Research (ACMR). But which is the better stock right now? Read more to find out.

Semiconductor stocks are still the talk of Wall Street, mainly because the chip shortage continues to drag on. The demand for chips is increasing, yet supply cannot keep pace.

This is an interesting time to be an investor in semiconductors as the lack of supply combined with soaring demand is nudging prices higher. The shift to remote work and remote learning has boosted the demand for computer chips all the more. This trend is likely to continue as new variants of COVID pop up.

Cohu (COHU) and ACM Research (ACMR) are two semiconductor stocks with significant potential yet little admiration from the talking heads on the financial networks. Let's take a closer look at each of these stocks to determine if either is worthy of ownership.

Cohu (COHU)

COHU is the top supplier of test and inspection handlers necessary to make computer chips. The company also makes test contactors, micro-electro-mechanical system test modules, and thermal sub-systems. COHU has a forward P/E ratio of 11.14, which indicates the stock is undervalued at its current price. The stock is currently trading near the halfway point between its 52-week low of $15.73 and its 52-week high of $51.86. 

COHU has an overall grade of B, which translates into a Buy rating in our POWR Ratings system. COHU has a grade of A in the Growth component and Bs in the Momentum and Value components. You can find out how COHU fares in the remaining components, including quality, stability, and Sentiment, by clicking here.

Of the 99 publicly traded companies in the Semiconductor & Wireless Chip industry, COHU is ranked 42nd. You can find out other top stocks in this industry by clicking here. Analysts are bullish on COHU, establishing an average target price of $56.56 for the stock. If COHU hits this price target, it will have increased in value by more than 57%. One analyst even set a price target of $70 for the stock. 

Click here to check out our Semiconductor Industry Report for 2021

ACM Research (ACMR)

ACMR makes cleaning equipment for single-wafers. This equipment eliminates contaminants, particles, and other grime that interferes with the chip-making process. ACMR has a forward P/E ratio of 62.97, which means it is overvalued at $89 per share. The stock's 52-week low is $58, and its 52-week high of $144.81.

ACMR has an overall grade of F and a Strong Sell rating in our POWR Ratings system. ACMR has a grade of F in the Sentiment component and Ds in the Quality, Value, and Stability components. If you want to find out how ACMR fares in the Momentum and Growth components, you can find out by clicking here.

Out of the 99 publicly traded companies in the Semiconductor & Wireless Chip space, ACMR is ranked third to last at 97th. ACMR had not had a significant news story since October of 2020, when one of its key clients was rumored to be added to the Entity List of the Commerce Department, meaning the company would be barred from importing American tech. The stock fell 22% on the news. 

Which is the Better Buy?

Investing in ACMR while it has a Strong Sell rating would be foolish. Investors should avoid ACMR until the stock moves up to at least a B. COHU is much more investable as it has an overall grade of Buy. If you want to add a chip stock to your portfolio, consider scooping up some shares of COHU.

COHU shares were trading at $33.61 per share on Wednesday afternoon, down $0.22 (-0.65%). Year-to-date, COHU has declined -11.97%, versus a 19.27% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.


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