Early in Wednesday morning trading, Camtek (CAMT)stock is up more than 4% on the day, less than $2 from triple digits. The Israel-based tech company is one of 81 Nasdaq stocks hitting a 52-week high. Over at the NYSE, 140 stocks are hitting 52-week highs. 

Today’s 52-week high is Camtek’s 51st of the past year. Only six other Nasdaq stocks have hit more 52-week highs in the past year. The company’s latest earnings report was top-notch, sending the shares up nearly 10% since its May 9 announcement. 

Back in February, I recommended Camtek and two other stocks from Barchart.com’s Top 100 Stocks to Buy. Up 28% since then and more than 250% over the past year, it can't possibly keep moving higher, can it?

It could. Here’s why. 

What’s Changed Since February?

As I said in February, the day after it reported excellent Q4 2023 results, the company’s business was looking good, and it was likely to deliver record results in 2024.

Camtek manufactures inspection and metrology equipment for the semiconductor industry. It has three primary systems: Eagle-i, a 2D inspection and metrology system; Eagle-AP, which uses software and hardware technologies to deliver 2D and 3D inspection and metrology capabilities on a single platform; and Golden Eagle, a panel inspection and metrology system.

I’m not about to claim any knowledge about this kind of technology. I only know that it’s growing and profitable with a sound balance sheet and cash flow. Beyond that, I probably couldn’t tell you the difference between a wafer and a cookie. 

When it reported Q4 2023 results, it said that it received 300 system orders in the second half of the year, which would generate $300 million in revenue in 2024 without any other growth. 

In Q1 2024, it had $97.0 million in revenue, 34% higher than a year earlier. On an annualized basis, that’s $388 million in annual revenue, 23% higher than $315.4 million in 2023. In 2023, its revenues actually declined nearly 2% year over year, so its comments about its orders from the second half of last year are coming to fruition in 2024.

On a non-GAAP basis, its operating profit was $29.0 million, 67% higher than Q1 2023. Its 29.9% operating margin was 590 basis points higher than a year ago, which is a very good sign. 

Its non-GAAP earnings per share were $0.64 in the first quarter, 53%  higher than $0.42 a year earlier. With three quarters left in the fiscal year, Camtek has already generated 33% of its 2023 EPS of $1.96. The analyst estimate for 2024 is $2.39, 22% higher than 2023. It could be $2.50 or higher if it continues to grow revenue by 30% or more a quarter.

It is on a roll.

It’s Got Plenty of Cash 

As I  said in February, Camtek finished 2023 with $157.2 million in net cash, $69.5 million in EBITDA profit, and an EBITDA margin of 22.0%. However, looking back on my notes, I can’t remember how I calculated the net cash. 

S&P Global Market Intelligence says it was $226.5 million, and EBITDA was $71.2 million on $315.4 million in revenue for a 22.6% EBITDA margin.

As of March 31, it had $263.9 million in net cash, $78.7 million in trailing 12-month EBITDA, and an EBITDA margin of 23.2% based on $339.9 million in TTM revenue, 60 basis points higher than at the end of 2023.  

The company’s cash balance at the end of March was $467 million, $18 million higher than at the end of December. As a result, it generated $5.6 million in interest income from the cash, $500,000 higher than a year earlier. 

The highest its net cash position has been in the company’s history was $266.5 million at the end of Q3 2023. Look for it to set a new record in the second quarter. 

Its balance sheet is rock-solid. 

The Valuation Is High

It will be high when you’re growing revenue by more than 30% in a quarter. Investors tend to pay more for growth than value.

As Moshe Eisenberg, Camtek’s CFO, said in the Q1 2024 conference call, it expects to grow revenues sequentially for the remaining three quarters of the year. In Q2, it expects revenue of $101 million at the midpoint of its guidance, 4.1% higher than Q1 and 37% higher than Q2 2023.

Its HBM (high bandwidth memory) and chiplet modules generated 60% of its revenue in the first quarter. Near the end of last year, it was expecting these two applications to account for 30% of sales. In 2024, COO Ramy Langer said it should settle around 50% by the end of the year. That should be very good for its margins. 

It expects to reach $500 million in revenue sometime beyond 2025. Assuming it reaches $388 million in 2024, it would require nearly 29% growth in the year after, a slight slowdown from 2024 but still attractive growth. 

The COO did not say when it would hit the company goal of $500 million in annual revenue. He only emphasized that it would likely happen in 2026 or later. 

Let’s assume it hits $500 million in 2026. That’s a compound annual growth rate of 16.6%, which is very doable. 

Based on a current EV/Revenue multiple of 10.4x, that would give it an enterprise value of $5.2 billion at the end of 2026, a 47% increase from $3.54 billion in May 2024. That’s decent but not spectacular appreciation over the next 2.5 years. 

If the multiple jumps to 15x revenue, its EV also jumps to $7.5 billion, 114% higher than currently. That’s far more palatable. 

Should the annual revenue growth remain in the 20-30% range through 2026, you could see an EV/Revenue multiple upwards of 20x. 

If you’re a momentum investor, Camtek stock remains a growth story worth betting on.  

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