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  • Writer's pictureAbacus Research

Entergris (ENTG): compounder in the making?

Entegris is a high quality chemicals and filtration company. It just happens to sell into the semiconductor market, and is therefore covered and classified as a semi-cap equipment company. This is wrong. 70% of the business is high margin consumables.

  • There are many reasons to think that EPS is too low, recovering semi volumes after a weaker 2019, accretive M&A, cost saves and solid tailwinds that are increasing the importance of materials science, enabling Entegris to gain share.

  • The bottom line is that we think street EPS estimates are far too low: We see 18% + upside to 2021 EPS.

  • Estimate that ENTG can compound EPS growth at ~20% for the next three years.

We think ENTG is a potential core holding and should be classified as an industrial compounder, at ~5%FCF yield and our expected strong growth profile, we like the risk-reward.

Potential Upside: $70 (+27%)

Sensible Downside: $47 (-15%)

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