||========== Universal Display (OLED) ===============||
I have held this stock for quite a while and believe it has a strong future. It was recently whacked by fears of the iPhone X sales and then by this recent “Feb-Ebb” (Trademark pending). I wanted to convince myself to buy more, and at the same time bring it back to the board. We have talked about it in the past, but it never got a big buy in. So here we go again.
Saul Analysis: (see KB#9939)
look for companies that are growing fast, have recurring income, insider ownership, some kind of moat, reasonable PE, etc, and hope to find most of these qualities in stocks I’m investing in. So…
Brief Overview: //probably from the web site or yahoo profile.
we have grown from an R&D start-up to a global leader in the OLED industry. Today, we work with the largest consumer display panel manufacturers in the world. Our proprietary technologies and materials can be found in virtually every commercial OLED product in the world, from smartwatches and tablets, to smartphones and TVs, including Samsung’s Galaxy series and LG’s OLED TVs. Our leading-edge phosphorescent technology is also key in OLED lighting. With over 15% of the world’s total electricity and 5% of worldwide greenhouse gas emissions stemming from lighting, more energy-efficient lighting products are in high demand. Based on our proprietary UniversalPHOLED® technology and materials, OLEDs have the potential to offer power efficiencies that are superior to those for today’s incandescent bulbs and fluorescent tubes. The OLED industry is just beginning to take off, and we are excited to continue to have a critical role in this new era of display and lighting technologies.
This is definitely a category leader, if not a category crusher.
look for companies that are easy to follow
Pass: a very popular stock, especially here at the FOOL.
Don’t need to understand the technology/industry (just the growth)
But, this is easy to understand, they can make all our displays better, brighter, more colorful, and more energy efficient. They have lots of Intellectual Property they get license fees for and they also produce materials used in the manufacture of OLED components.
want a company with rapidly growing earnings
Pass: IBD Gives them an EPS ranking of 99 (better than 99% of the companies in their db) and says
3 Year EPS Growth Rate = 24%
look for recurring revenue
Not a razor-blade model, but lots of license fees. Saul is not too keen on that model, but think about how well it worked for Qualcomm for so long. Patents: ~4,200+ (issued & pending patents worldwide, as of 12/31/16)
this very strong patent position translates into a strong moat
Again from Q3
Revenue from royalty and license fees increased 131% to $12.0 million in the third quarter, compared with $5.2 million in the third quarter of 2016.
look for substantial insider ownership
what is good number?
https://www.gurufocus.com/ownership/OLED shows 3.78%
look for a company with rapidly growing revenue. (at least 25% per year)
Also, this snippet from the Nov 2, 2017 Q3 press release shows their core areas of product and growth:
Pass: Sales % Chg (Last Qtr) 104%
Fail: 3-Year Sales Growth Rate 13% (weak)
Financial Highlights for the Third Quarter of 2017
• Total revenue increased 104% to $61.7 million in the third quarter, compared with $30.2 million in the third quarter of 2016, driven by higher material sales as well as royalty and license fees.
• Revenue from material sales increased 100% to $47.0 million in the third quarter, compared with $23.5 million in the third quarter of 2016, due to an increase in phosphorescent emitter sales.
• Revenue from royalty and license fees increased 131% to $12.0 million in the third quarter, compared with $5.2 million in the third quarter of 2016.
• Operating income increased by $18.8 million to $15.8 million in the third quarter, compared with an operating loss of $3.0 million in the third quarter of 2016.
• Net income increased by $15.0 million to $13.5 million or $0.28 per diluted share in the third quarter, compared with a net loss of $1.5 million or $0.03 per diluted share in the third quarter of 2016.
Some financials can be found at Finviz…
Get the information yourself. (Not yahoo, etc)
look for a company that has a long way to grow long runway. One that ideally can grow almost forever
Pass: All smartphones and tablets may convert to OLED. All TVs may convert to OLED. There is some need for flexible displays, but once they are cheap people will find a reason to “need” them. OLED lighting is a new field. Outdoor advertising? Car displays?
Not too big to grow/double/triple
Pass: Market Cap $6.7B – Bill Gates could buy them with change from his sofa.
want a company that does something special,
Pass: this is pretty special and touches lots of consumer items
want management to be interested in making a profit.
I am sure this is a pass. This is an innovative and growing company, management is not just around waiting for a good pension to retire.
Stocks Saul likes to avoid:
China, Mining/Drilling, Restaurants
Addition research ideas for evaluating a new company.
tidbits from last quarterly report
“We are pleased to report another outstanding quarter of solid results,” said Sidney D. Rosenblatt, Executive Vice President and Chief Financial Officer of Universal Display. “During the quarter, momentum in the OLED industry continued to grow, from the launch of new flagship OLED smartphones, to increasing demand for OLED TVs, to announced launch plans for the world’s first foldable OLED display product. It is exciting to see the consumer market’s broadening embrace of OLEDs in a myriad of products, including wearables, smartphones, IT, automotive, TVs, as well as the emergence of OLED lighting.”
Fail: Last annual report (2016) says one customer is 63% of revs and second is 28%. Most revenue from South Korea, so probably Samsung and LG. A little research could quickly confirm that.
tidbits from the last Conference Call:
Conference Calls Here: http://ir.oled.com/shareholders/financials/financial-summary…
someone should read the Conf Call, let us know if there is anything interesting.
two years of revenues:
From earnings releases…
Year Q1 Q2 Q3 Q4 Year % change 2015 31.2 58.1 39.4 62.3 191 2016 29.7 64.4 30.2 74.6 198.9 4% 2017 55.6 102.5 61.7 95.2 315 58% 2017Q4 and full is estimate based on last press release Earnings due 2/22/18 More Year Revs YoY % 2012 83 2013 146 76% 2014 191 31% 2015 191 0% 2016 198.9 4% 2017 $315.00 58% est
two years of adjusted earnings
12 month trailing earnings:
From earnings releases (OLED calls them Net Income and I assume they are non-GAAP)
Trailing Earnings Last Year Trailing Earnings This Year 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 $0.39 $0.04 $0.46 ($0.03) $0.55 $0.22 $0.99 $0.28 Or like this: Q EPS Yearly Growth Q-8 $0.39 Q-7 $0.04 Q-6 $0.46 Q-5 ($0.03) $0.86 Q-4 $0.55 Q-3 $0.22 Q-2 $0.99 Q-1 $0.28 $2.04 137% Or view them like this.. TTME Last Year $0.86 TTME This Year $2.04 YoY EPS 137% Price $ 135.00 TTM PE 66.18 1YPEG 0.48
Is the trailing Year PEG good?
//What is a good range?
Somebody check the math, but it seems we have a 1YPEG of 0.48, which is great. Finviz has the standard PEG as 1.23
Here’s another a nice way to evaluate companies for investment.
Good Free Cash Flow?
*someone could elaborate on this.
Operating Margins increasing? (Revenue growth faster than operating expenses growth)
Pass: if I am interpreting these charts correctly
Is share count increasing too fast?
Very steady since 2012
http://www.macrotrends.net/stocks/charts/OLED/shares-outstan… *FYI, this is a nifty site worth checking out.
Is P/FCF less than 30-ish?
Fail: 82.89 per finviz.
low debt levels?
Pass: No debt: see here https://www.finviz.com/quote.ashx?t=oled
good cash levels?
$7.81/share per Finviz. Is that good or bad, not sure?
tidbits on competitors and risk: (see the 10K)
Quantum Dot is a competing technology. (QLED)
Morningstar’s list of “competitors”
Fool from Oct 2017
Other useful links
//(investor presentations, interesting new links, charts from FinViz and/or Stockcharts.com)
An old article
#1 stock in its group. Ratings decent, a lot of institutional selling recently.
Composite Rating 91 Neutral
EPS Rating 99 Pass
RS Rating 92 Pass
Group RS Rating C+ Neutral
SMR Rating A Pass
Acc/Dis Rating D- Fail
OLED took a dump on iPhone worries. This shot it down thru the 50dma on high volume, a sell sign. The Feb-Ebb recently took it down to the 200dma, where it has held nicely – a good sign
Some smart Fools like the stock here.