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MEMC Electronic Materials Inc. Message Board

  • chrisceeaustin chrisceeaustin Apr 23, 2013 9:47 AM Flag

    S&P Capital IQ says 40% growth in earnings each year for 3 years!

    By Angelo Zino, S&P Capital IQ analyst, The Outlook

    Our latest Focus Stock is MEMC Electronic Materials (WFR +2.05%), which carries S&P Capital IQ's highest investment recommendation of 5-STARS or "strong buy."

    MEMC, which is changing its name to SunEdison, manufactures silicon wafers, which are used for the production of almost all semiconductor-based devices and develops and owns solar power generating facilities. We think earnings will grow at an annual compounded growth rate of more than 40% over the next three years aided by sequential margin expansion, as volume rises and cost cut benefits are recognized.

    After two years of slowing sales growth, we think the semiconductor industry is near a cyclical trough. For MEMC, we see good execution and increased market share helping to lift profits in the future.

    MEMC has improved its share of the wafer market in recent quarters. We believe sales of the company's higher margin "Epi" -- for epitaxial deposition -- wafers will witness particularly strong growth.

    Following recent cost-cutting efforts, we think this business is now better aligned to take advantage of an industry recovery and will experience wider profit margins in the future. We also think MEMC may eventually spin off its semiconductor business, which could unlock significant value to shareholders.

    MEMC's existing SunEdison business, which the company acquired in 2009, is a leading installer of photovoltaic solar energy equipment in North America with significant overseas sales as well.

    SunEdison uses a unique financing model in which customers pay only for the electricity output generated by the solar system installed. That avoids the significant upfront capital costs of buying a system while also lowering power costs.

    We note that current prices for photovoltaic solar panels, a business that MEMC does not engage in, are far below production costs.

    We think MEMC has taken the right steps by expanding its SunEdison solar project business using an "

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    • Distribution generation happens to be a faster growing, higher margin business for the company. WFR is also growing in the residential and small commercial space in this region. About 70% of the company's 2012 revenues came from the solar segment rest assured the future is bright.

      Sentiment: Strong Buy