EMCORE (NasdaqGM:EMKR) - Share price, News & Analysis

Q: What is the Fair Price of EMKR when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

EMKR ($3.4) is trading below our estimate of [[fair value]] ($85.2)

EMKR fundamental analysis
Snowflake Score
Valuation	4/6
Future Growth	1/6
Past Performance	4/6
Financial Health	6/6
Dividends	0/6

EMKR Stock Overview

EMCORE Corporation, together with its subsidiaries, provides advanced mixed-signal optics products in the United States, Canada, Asia, Europe, and internationally.

Rewards

Trading at 96% below our estimate of its fair value

Revenue is forecast to grow 9.28% per year

Earnings grew by 196.4% over the past year

Risk Analysis

Earnings are forecast to decline by an average of 136.2% per year for the next 3 years

Large one-off items impacting financial results

EMCORE Competitors

Silicom

NasdaqGS:SILC

US$275.9m

Aviat Networks

NasdaqGS:AVNW

US$354.0m

Cambium Networks

NasdaqGM:CMBM

US$514.5m

AudioCodes

NasdaqGS:AUDC

US$696.8m

Price History & Performance

Summary of all time highs, changes and price drops for EMCORE
Historical stock prices
Current Share Price	US$3.40
52 Week High	US$9.14
52 Week Low	US$2.94
Beta	1.25
1 Month Change	5.92%
3 Month Change	8.97%
1 Year Change	-62.39%
3 Year Change	12.58%
5 Year Change	-62.01%
Change since IPO	-83.52%

Recent News & Updates

Jul 15

Emcore Corporation: It Is Darkest Before Dawn

EMKR has lost more than half of its value YTD, but the charts suggest the stock has hit bottom, and the worst is over. The inventory problem made its presence felt in a big way in Q2, but EMKR's numbers should get better over time as it is a problem that can heal itself. EMKR is arguably undervalued, especially since the company is unlikely to be held down by current problems in the long run. Don’t expect any quick rewards as wounds need time to heal, but long EMKR is worth it for the long haul. EMCORE Corporation (EMKR) is in a hole. The inventory issue revealed earlier in the year has started to negatively impact earnings in a big way, putting EMKR firmly in the red. The stock itself has lost over half of its value YTD. However, the stock is no longer in decline. The worst may have passed for EMKR. Why will be covered next. Who is EMKR EMKR may not be a household name, but as a supplier of optical semiconductors and mixed-signal devices that incorporate analog and digital circuits, its components are used by many well-known companies in a wide range of industries. EMKR's product line can be split into two segments, the broadband segment and the aerospace & defense or A&D segment. In the broadband segment, EMKR supplies, for instance, optical transmitters and other components to companies like Comcast (CMCSA) and Cisco (CSCO) to build high-speed communication networks. Other products include semiconductor chips for hyper-scale datacenters build by companies like Amazon (AMZN) and Google (GOOG, GOOGL). In the A&D segment, EMKR is a provider of inertial navigation systems, inertial measurement units and other sensors for stabilization that are utilized in a range of products, including intercontinental and other long-range ballistic missiles, precision guided munitions and unmanned aerial vehicles or UAVs produced by companies like Raytheon (RTX) and Lockheed Martin (LMT). Why the worst may have passed for EMKR The stock has lost 55% of its value YTD. That is bad, but most of the losses came in the first two months of the year as shown in the chart below. The stock was already heading down prior to this, but things got a lot worse in February when the stock fell off a cliff after EMKR identified an inventory problem at one of its customers. This excess inventory is expected to have a negative impact on the quarterly numbers for some time. A previous article goes deeper into this issue. Source: finviz.com However, the decline has come to a virtual standstill, with the stock staying above the $3 price level for the last several months. Note how in the chart above there is a declining trendline that goes all the way back to last year. EMKR is on the verge of breaking through this trendline by virtue of going sideways. All the stock has to do is to keep doing what it has been doing for the last several months and the trend will be broken. In addition, going sideways brings it closer and closer to overtaking the 50-day moving average, a bullish signal. The stock may be in the process of building a base by going sideways. This would be reminiscent of what happened back in mid-2020, when the stock spent months hovering over the $3 price level, before the stock started to ascend in late 2020 until it peaked in mid-2021. If history repeats itself, the stock may go on another rally once it is done building a base on top of the $3 region. It's possible the stock could still break below the $3 region, but history suggests it won't. Going back further in time shows the stock bottoming in the $3 region on numerous occasions. It happened, for instance, in 2019 after a multi-year decline starting in mid-2017. There are numerous other instances in the 2012-2014 time frame of the stock reversing course after hitting bottom at $3 or so. If history is any indication, the stock may have once again hit bottom now that it has reached the $3 region. The odds definitely favor this outcome. On the other hand, if support fails and the stock falls below the $3 region, then there may be a long way to go before the stock recovers. The one notable exception when the stock did fall below the $3 region occurred in March 2020 after the stock collapsed due to COVID-19. When that happened, EMKR fell all the way to $1.46, which happens to be the low in the last ten years. In other words, the stock could potentially lose another 50% or so if support in the $3 region does not hold. Why long EMKR is worth considering Odds are EMKR has hit bottom in the $3 region, but chart patterns are not the only argument in favor of the bull case. Another one is valuations, although it's not as clear-cut as it used to be. For instance, while EMKR has a market cap of $117M, its enterprise value stands at just $56M thanks to having $80.9M in cash on its balance sheet. It's true EMKR is currently experiencing problems, mostly due to inventory building, but some would argue that $56M is too low a value for a company like EMKR. EMKR has a tangible book value of $139.4M, or approximately $3.72 per share. EMKR has a price-to-book of 0.83, significantly below the 1.0 threshold people keep an eye on. Quite a number of people believe a company is undervalued when its stock trades below its book value, as is the case right now with EMKR. The table below shows the multiples for EMKR. On the other hand, a stock can be valued at less than its book value when there is the perception that the company is heading for financial difficulties. For example, if the company is expected to suffer sustained losses that could eat away at the balance sheet. This could happen even if the balance sheet is in good shape at the moment. Now also how forward multiples are expected to deteriorate compared to the trailing ones. EMKR, for instance, does not have a forward P/E with EMKR expected to finish in the red in FY2022. EMKR trades at 3 times EBITDA on a trailing basis, but this jumps to 24 times EBITDA on a forward basis, which reflects a drastic deterioration in future earnings. EMKR Market cap $116.69M Enterprise value $56.18M Revenue ("ttm") $161.5M EBITDA $17.3M Trailing P/E 6.23 Forward P/E N/A PEG ratio 0.04 P/S 0.71 P/B 0.83 EV/sales 0.35 Trailing EV/EBITDA 3.24 Forward EV/EBITDA 24.46 Source: Seeking Alpha Why earnings are expected to get worse in the near term for EMKR As mentioned earlier, EMKR discovered a problem with inventories at a major customer. As a result, sales and earnings are expected to decline due to the need to clear excess inventories. The most recent earnings report shows the impact on EMKR. Q2 revenue declined by 22.7% QoQ and 15% YoY to $32.7M. Gross and operating margins dropped. EMKR flipped into the red after suffering a net loss of $2.2M or $0.06 per share in terms of GAAP and a net loss of $750,000 or $0.02 in terms of non-GAAP. Adjusted EBITDA barely managed to stay out of the red at plus $270,000. There was also share dilution with the weighted-average number of shares at 37.2M in Q2, up from 34.5M a year ago. The quarterly numbers have certainly gotten a lot worse. The table below shows the numbers for Q2 FY2022. (GAAP) Q2 FY2022 Q1 FY2022 Q2 FY2021 QoQ YoY Revenue $32.650M $42.236M $38.406M (22.70%) (14.99%) Gross margin 28% 37% 38% (900bps) (1000bps) Operating margin (7%) 6% 12% (1300bps) (1900bps) Operating profit (loss) ($2.313M) $2.498M $4.583M - - Net income (loss) ($2.225M) $2.414M $4.384M - - EPS ($0.06) $0.06 $0.13 - - (Non-GAAP) Revenue $32.650M $42.236M $38.406M (22.70%) (14.99%) Gross margin 30% 38% 39% (800bps) (900bps) Operating margin (2%) 13% 15% (1500bps) (1700bps) Operating profit (loss) ($0.738M) $5.320M $5.923M - - Net income (loss) ($0.750M) $5.309M $5.874M - - EPS ($0.02) $0.14 $0.17 - - Source: EMKR Form 8-K Guidance calls for Q3 FY2022 revenue of $25-27M, a decline of 20.4% QoQ and 39.1% YoY at the midpoint. Furthermore, guidance would have been even worse if not for the expected contributions of roughly $3.5M from recent acquisitions. EMKR is projected to post a GAAP loss of $0.24 per share in FY2022, mostly due to a GAAP loss of $0.15 per share in Q3. On the other hand, Q4 is expected to show improvement with a GAAP loss of $0.09 per share. Too much transmitter inventory may be the biggest issue facing EMKR at the moment, but it's not the only one. EMKR is facing headwinds on the supply side as well. From the Q2 earnings call: "Semiconductor availability was a difficult problem in the quarter and costs were up across the board. Microcontrollers and FPGAs were particularly problematic experiencing substantial price increases, other unpredictable logistics challenges that we saw in Q1 remained with us in Q2, causing some surprise pushouts of material that we expected. Those problems are likely to persist going forward, and we don't see a catalyst to drive predictability into the supply chain in the short term. Some components have lead times stretched to over 90 weeks."

May 06

What Is EMCORE Corporation's (NASDAQ:EMKR) Share Price Doing?

EMCORE Corporation ( NASDAQ:EMKR ), is not the largest company out there, but it received a lot of attention from a...

Shareholder Returns

	EMKR	US Communications	US Market
7D	6.3%	0.8%	1.0%
1Y	-62.4%	-12.3%	-12.9%

Return vs Industry: EMKR underperformed the US Communications industry which returned -12.3% over the past year.

Return vs Market: EMKR underperformed the US Market which returned -12.9% over the past year.

Price Volatility

Is EMKR's price volatile compared to industry and market?
EMKR volatility
EMKR Average Weekly Movement	6.6%
Communications Industry Average Movement	8.3%
Market Average Movement	7.9%
10% most volatile stocks in US Market	17.2%
10% least volatile stocks in US Market	3.2%

Stable Share Price: EMKR is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 7% a week.

Volatility Over Time: EMKR's weekly volatility (7%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1984	365	Jeff Rittichier	https://emcore.com

EMCORE Corporation, together with its subsidiaries, provides advanced mixed-signal optics products in the United States, Canada, Asia, Europe, and internationally. It operates in two segments, Aerospace and Defense, and Broadband. The company offers navigation system and inertial sensing products, such as fiber optic gyros products that includes gyroscopes, inertial measurement units (IMU), and inertial navigation systems (INS), as well as QMEMS gyroscopes, accelerometers, IMUs, and INS products primarily for the aerospace and defense markets; and defense optoelectronics comprising optiva platform fiber optic transport systems and erbium doped fiber amplifiers, as well as ruggedized microwave flange-mount transmitters, receivers, and optical delay line products.

EMCORE Fundamentals Summary

How do EMCORE's earnings and revenue compare to its market cap?
EMKR fundamental statistics
Market Cap	US$127.57m
Earnings (TTM)	US$18.88m
Revenue (TTM)	US$161.50m

6.8x

P/E Ratio

0.8x

P/S Ratio

Is EMKR overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
EMKR income statement (TTM)
Revenue	US$161.50m
Cost of Revenue	US$102.40m
Gross Profit	US$59.10m
Other Expenses	US$40.22m
Earnings	US$18.88m

Last Reported Earnings

Mar 31, 2022

Next Earnings Date

Aug 09, 2022

Earnings per share (EPS)	0.50
Gross Margin	36.59%
Net Profit Margin	11.69%
Debt/Equity Ratio	0%

How did EMKR perform over the long term?

See historical performance and comparison

We’ve recently updated our valuation analysis.

Valuation

Is EMKR undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

4/6

Valuation Score 4/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for EMKR?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for EMKR. This is calculated by dividing EMKR's market cap by their current preferred multiple.
What is EMKR's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	US$127.57m

EMKR key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	0.4x
Enterprise Value/EBITDA	3.9x
PEG Ratio	-0.05x

Price to Earnings Ratio vs Peers

How does EMKR's PE Ratio compare to its peers?

EMKR PE Ratio vs Peers

The above table shows the PE ratio for EMKR vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	34.5x
SILC Silicom	21.9x	n/a	US$275.9m
AVNW Aviat Networks	18.2x	27.2%	US$354.0m
CMBM Cambium Networks	75.7x	39.0%	US$514.5m
AUDC AudioCodes	22.4x	13.4%	US$696.8m
EMKR EMCORE	6.8x	-136.2%	US$127.6m

Price-To-Earnings vs Peers: EMKR is good value based on its Price-To-Earnings Ratio (6.8x) compared to the peer average (34.5x).

Price to Earnings Ratio vs Industry

How does EMKR's PE Ratio compare vs other companies in the US Communications Industry?

Price-To-Earnings vs Industry: EMKR is good value based on its Price-To-Earnings Ratio (6.8x) compared to the US Communications industry average (21.9x)

Price to Earnings Ratio vs Fair Ratio

What is EMKR's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

EMKR PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	6.8x
Fair PE Ratio	1.4x

Price-To-Earnings vs Fair Ratio: EMKR is expensive based on its Price-To-Earnings Ratio (6.8x) compared to the estimated Fair Price-To-Earnings Ratio (1.4x).

Share Price vs Fair Value

What is the Fair Price of EMKR when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: EMKR ($3.4) is trading below our estimate of fair value ($85.2)

Significantly Below Fair Value: EMKR is trading below fair value by more than 20%.

Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is more than 20% higher than the current share price, but analysts are not within a statistically confident range of agreement.

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Future Growth

How is EMCORE forecast to perform in the next 1 to 3 years based on estimates from 4 analysts?

Future Growth Score

1/6

Future Growth Score 1/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

-136.2%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: EMKR's earnings are forecast to decline over the next 3 years (-136.2% per year).

Earnings vs Market: EMKR's earnings are forecast to decline over the next 3 years (-136.2% per year).

High Growth Earnings: EMKR's earnings are forecast to decline over the next 3 years.

Revenue vs Market: EMKR's revenue (9.3% per year) is forecast to grow faster than the US market (8% per year).

High Growth Revenue: EMKR's revenue (9.3% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: Insufficient data to determine if EMKR's Return on Equity is forecast to be high in 3 years time

Discover growth companies

Past Performance

How has EMCORE performed over the past 5 years?

Past Performance Score

4/6

Past Performance Score 4/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

18.4%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: EMKR has a large one-off gain of $5.4M impacting its March 31 2022 financial results.

Growing Profit Margin: EMKR's current net profit margins (11.7%) are higher than last year (4.8%).

Past Earnings Growth Analysis

Earnings Trend: EMKR has become profitable over the past 5 years, growing earnings by 18.4% per year.

Accelerating Growth: EMKR's earnings growth over the past year (196.4%) exceeds its 5-year average (18.4% per year).

Earnings vs Industry: EMKR earnings growth over the past year (196.4%) exceeded the Communications industry 42.1%.

Return on Equity

High ROE: EMKR's Return on Equity (13.5%) is considered low.

Discover strong past performing companies

Financial Health

How is EMCORE's financial position?

Financial Health Score

6/6

Financial Health Score 6/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: EMKR's short term assets ($144.0M) exceed its short term liabilities ($26.7M).

Long Term Liabilities: EMKR's short term assets ($144.0M) exceed its long term liabilities ($21.7M).

Debt to Equity History and Analysis

Debt Level: EMKR is debt free.

Reducing Debt: EMKR had no debt 5 years ago.

Debt Coverage: EMKR has no debt, therefore it does not need to be covered by operating cash flow.

Interest Coverage: EMKR has no debt, therefore coverage of interest payments is not a concern.

Balance Sheet

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Dividend

What is EMCORE current dividend yield, its reliability and sustainability?

Dividend Score

0/6

Dividend Score 0/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage

Dividend Yield vs Market

Notable Dividend: Unable to evaluate EMKR's dividend yield against the bottom 25% of dividend payers, as the company has not reported any recent payouts.

High Dividend: Unable to evaluate EMKR's dividend yield against the top 25% of dividend payers, as the company has not reported any recent payouts.

Stability and Growth of Payments

Stable Dividend: Insufficient data to determine if EMKR's dividends per share have been stable in the past.

Growing Dividend: Insufficient data to determine if EMKR's dividend payments have been increasing.

Earnings Payout to Shareholders

Earnings Coverage: Insufficient data to calculate payout ratio to determine if its dividend payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: Unable to calculate sustainability of dividends as EMKR has not reported any payouts.

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Management

How experienced are the management team and are they aligned to shareholders interests?

5.3yrs

Average management tenure

CEO

Jeff Rittichier (62 yo)

7.58yrs

Tenure

US$2,699,616

Compensation

Mr. Jeffrey S. Rittichier, also known as Jeff, has been the Chief Executive Officer of EMCORE Corporation since January 3, 2015 and serves as its President. Mr. Rittichier has an extensive record of accomp...

CEO Compensation Analysis

Compensation vs Market: Jeff's total compensation ($USD2.70M) is above average for companies of similar size in the US market ($USD767.73K).

Compensation vs Earnings: Jeff's compensation has increased by more than 20% in the past year.

Leadership Team

Experienced Management: EMKR's management team is seasoned and experienced (5.3 years average tenure).

Board Members

Experienced Board: EMKR's board of directors are considered experienced (6.7 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/08/07 00:00
End of Day Share Price	2022/08/05 00:00
Earnings	2022/03/31
Annual Earnings	2021/09/30