Kulicke & Soffa Industries (KLIC) , a leader in wire bonding equipment used in semiconductors, seems to be hitting its stride. This under-the-radar name, which I believe exhibits some attributes that may make it worthy of a potential acquisition, is up about 23% since early June.
Earlier this week, KLIC reported fourth quarter results, and beat consensus estimates on both revenue ($145.8 million vs. $140 million consensus), and earnings per share ($0.15 vs. $0.11). Revenue was up 22.3% over the same quarter last year, and exceeded the company's own guidance of between $135 and $145 million.
An already strong balance sheet got even better. Cash and cash equivalents rose nearly $32 million to $547.9 million, or $7.78 per share. That's a formidable safety net, considering that the stock currently trades in the $15 range and debt remained a non-event at $17 million. It is important to note that much of the company's cash is offshore and it would likely benefit if there's legislative action allowing the repatriation of cash at more favorable tax rates.
KLIC has reduced shares outstanding by about 8.5% over the past two years, but is now near the end of a $100 million stock buyback program. A low repatriation tax rate would allow the company to commence a new buyback program without taking a huge tax hit.
I'd argue that buying back more shares and initiating a cash dividend would be an even more powerful driver. Others are pushing for the sale of the company, and it certainly is attractive on that basis, if there's anyone willing to pony up for it.
Either way, shares remain cheap trading at 17x next year's consensus estimates (although the consensus in this case is just three analysts) especially when you consider that the company has just over 50% of its market cap in cash. KLIC also remains a "double net" (company trading at between 1x and 2x net current asset value or NCAV), currently trading at 1.78x NCAV.
At this point, the stock is not all that far from a 10-year high it achieved in February 2015. If corporate tax reform gains steam, that might just be the tailwind that drives shares higher.