Should You Buy It? Entegris

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Symbol	Price	Change
ENTG	4.50	-0.06

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Entegris performs an integral service in the chip business, but it works behind the scenes and likely isn't even noticed by the end user. The company makes over 10,000 products that are used to keep semiconductor and disk-drive materials contamination-free during the manufacturing process.

Despite Entegris' low profile, the stock hit a fresh 52-week high on Wednesday, and at $5.00, is up nearly 130% year-to-date. The company has not been profitable over the past three quarters, but last month management boosted third-quarter sales guidance and also raised $57 million of equity (at $3.80 a share), which will be used to pay down debt.

With that in mind, I'm here to answer readers' questions: Should you buy it? Does Entegris still offer value at current levels, or should investors avoid the stock?

The recent stock offering will materially improve the company's finances. At the end of the second quarter, Entegris had $151.7 million of debt, compared with $84 million of cash, but this deal will bring the balance sheet closer to zero net borrowing.

But enough about the company's financial leverage, the real question to future gains lies in Entegris' potential operating momentum. To date, the company has benefited from a recovery in semiconductor demand and higher capital spending levels, and the answer to the above questions rely upon the sustainability of this trend.

Entegris saw sales improve each month during the second quarter, and according to research firm Gartner, the company's outlook should remain bright over the next few quarters. Also according to Gartner, semiconductor capital spending will increase 34% year over year in 2010.

In the meantime, Entegris has focused on cutting costs. This includes the closure of one of its largest manufacturing plants in the U.S. last year, with the operations since being moved to Malaysia. Even so, profitability could remain elusive for the company until the first quarter of 2010.

So, while the Entegris has attractive longer-term prospects, I believe that readers should not chase the stock at current levels. That said, should the shares pull back 10% to 15% from current levels, the company would appear more attractive for an investment.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider Entegris to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

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