Is It Time To Reconsider Veeco Instruments (VECO) After Recent Share Price Weakness
- If you are wondering whether Veeco Instruments is attractively priced or already fully valued, you are not alone. This article is set up to walk you through what the current share price might be implying.
- The stock recently closed at US$29.32, with returns of a 10.1% decline over 7 days, an 11.1% decline over 30 days, a 4.0% decline year to date, but a 17.8% return over 1 year, 41.8% over 3 years and 31.4% over 5 years.
- Recent price moves sit against a backdrop of ongoing interest in semiconductor equipment names and company specific developments that continue to shape investor expectations. News around sector demand trends, capital spending plans from chip manufacturers and broader sentiment toward semiconductor capital equipment companies helps frame how investors are thinking about Veeco Instruments today.
- Veeco Instruments currently has a valuation score of 2 out of 6, which means it screens as undervalued on 2 of the 6 checks we run. Next we will walk through the usual valuation tools before finishing with a broader way to think about what the market might be pricing in.
Veeco Instruments scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Veeco Instruments Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model takes estimates of the cash a company may generate in the future and discounts those amounts back to today, to arrive at an estimate of what the whole business could be worth now.
For Veeco Instruments, the model uses last twelve months Free Cash Flow of about $52.28 million as a starting point, then applies a 2 Stage Free Cash Flow to Equity approach. The next ten years of Free Cash Flow are projected in dollar amounts, for example $55.37 million in 2026 and $79.01 million in 2035, with each year discounted back to today. Simply Wall St notes that analysts typically provide up to five years of estimates and further years are extrapolated.
Bringing these discounted cash flows together results in an estimated intrinsic value of $12.76 per share under this DCF framework. Compared with the recent share price of $29.32, the model indicates the stock is around 129.8% above this estimate, so on this measure Veeco Instruments screens as overvalued.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Veeco Instruments may be overvalued by 129.8%. Discover 53 high quality undervalued stocks or create your own screener to find better value opportunities.
Approach 2: Veeco Instruments Price vs Earnings
For a profitable company like Veeco Instruments, the P/E ratio is a useful shorthand for how much investors are paying for each dollar of earnings. It rolls together expectations about the business into a single number that is easy to compare across companies.
What counts as a normal or fair P/E depends on what investors expect for future growth and how much risk they see in those earnings. Higher expected growth or lower perceived risk can justify a higher multiple, while more uncertainty or weaker growth prospects usually point to a lower one.
Veeco Instruments currently trades on a P/E of 35.90x. That sits below the peer average of 52.00x and also below the broader Semiconductor industry average P/E of 42.57x. Simply Wall St also provides a Fair Ratio of 34.12x, which is its estimate of what a reasonable P/E could be for Veeco Instruments given factors such as earnings growth, profit margins, industry, market cap and company specific risks.
This Fair Ratio aims to be more tailored than a simple comparison with peers or the industry. It adjusts for the company’s own growth profile and risk characteristics rather than assuming all semiconductor names deserve the same multiple. Compared with the current P/E of 35.90x, the Fair Ratio of 34.12x suggests Veeco Instruments trades somewhat above this tailored estimate.
Result: OVERVALUED
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Upgrade Your Decision Making: Choose your Veeco Instruments Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. These let you attach a clear story about Veeco Instruments to the numbers, such as your fair value, and your own expectations for future revenue, earnings and margins.
A Narrative on Simply Wall St connects three pieces: your view of the business, the financial forecast that follows from that view, and the fair value that arises from those assumptions.
You can explore these Narratives on the Veeco Instruments Community page, where millions of investors share different perspectives. This helps you quickly see how people with the same data can reach different conclusions about when a stock looks attractive or expensive by comparing their Fair Value to the current Price.
For example, one Veeco Instruments Narrative currently anchors on a Fair Value of US$36.00 while another anchors on US$21.00. This shows how different views about risks, growth and profit margins can all be made explicit and are then updated automatically as new earnings, guidance or news are added to the platform.
For Veeco Instruments however we will make it really easy for you with previews of two leading Veeco Instruments Narratives:
Fair value in this bullish narrative: US$36.00 per share
Implied pricing vs that fair value: around 18.6% below the fair value based on the recent US$29.32 share price
Revenue growth assumption used: 13.01%
- Views Veeco as well positioned to grow share in areas like DRAM, ion beam and annealing tools, helped by strong customer engagement and evaluation programs that could turn into larger follow on orders.
- Assumes rising demand tied to AI, electrification and compound semiconductors, with government incentives helping broaden the customer base and smooth out some of the cyclicality.
- Takes the view that these drivers support a fair value of US$36.00, with higher long term margins and earnings than the current share price appears to reflect, while still acknowledging risks around competition, customer concentration and execution.
Fair value in this bearish narrative: US$21.00 per share
Implied pricing vs that fair value: around 39.6% above the fair value based on the recent US$29.32 share price
Revenue growth assumption used: 4.44%
- Focuses on geopolitical and trade risks, supply chain costs and the impact of softer capital spending, all of which could weigh on margins and keep growth more muted.
- Highlights Veeco's reliance on a small group of large customers and rising competition from well funded Asian equipment vendors as key sources of earnings volatility.
- Concludes that these risks justify a lower fair value of US$21.00, using more conservative assumptions for growth, margins and the P/E multiple than the bullish camp.
Taken together, these Narratives show you the spread of expectations that other investors are working with. If you want to see the full set of assumptions, the detailed forecasts and how other community members are thinking about Veeco Instruments, Curious how numbers become stories that shape markets? Explore Community Narratives.
Do you think there's more to the story for Veeco Instruments? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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