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%)