|Shares Out. (in M):||28||P/E||0||0|
|Market Cap (in $M):||153||P/FCF||0||0|
|Net Debt (in $M):||-64||EBIT||0||0|
I believe Emcore (EMKR) represents a compelling long opportunity at current levels.
What do they do?
At its core, EMKR focuses on mixed signal optics chips and deploys this core technology in various applications. The vast majority of its business is products that go into the cable TV (CATV) end market, but they also serve satcom, wireless, navigation/defense, and telecom networking. EMKR uses its indium phosphide wafer fabrication facility in CA as the basis for producing all of its products. In general EMKR focuses on production of the core chips using their own fab, while outsourcing a lot the construction of full components and subsystems to either their facilities in China or to external partners. They break out their business in 3 product lines:
For CATV (79% of FY17 revenue and the bulk of their ‘broadband’ segment), and without getting into too much detail, EMKR’s wide range of fiber optic transmitters, receivers, amplifiers, switches, lasers, etc “comprise a complete end-to-end CATV system” (as they state it).
For everything else (21% of FY17 revenue), satcom and chip devices have been the largest, but navigation (more below) represents the biggest potential revenue opportunity.
I go into more detail on the CATV and Navigation pieces of their business below.
New Management & Improved Fundamentals
EMKR essentially went through a wholesale leadership change starting 4 years ago, which was catalyzed by an activist investor (Stephen Becker).
And financial performance has improved dramatically since…