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FormFactor Acquires FRT, Expands in Test & Measurement Space

Zacks Equity Research

FormFactor Inc. FORM recently acquired Germany-based FRT to further expand in the semiconductor testing and measurement space. Per the deal, FormFactor paid €19.7 million in cash for the acquisition.

Notably, FRT supplies metrology products in the semiconductor industry. The company boosted revenues at a compound annual growth rate of more than 75% since its inception in 2016 to 2018. 

The latest buyout will expand FormFactor’s addressable market into 3D surface metrology and enhance the existing Engineering Systems business.

FormFactor, Inc. Price and Consensus

 

FormFactor, Inc. Price and Consensus

FormFactor, Inc. price-consensus-chart | FormFactor, Inc. Quote

Deal Rationale

The deal will likely complement FormFactor’s product portfolio, particularly consumable wafer test probe products. This will help the company to gain a leading position in the semiconductor testing and measurement market by leveraging its resources to expand into newer markets.

Further, it is expected to expand FormFactor’s addressable market by $150 million via opening new engineering systems, thereby expanding test and measurement businesses.

The acquisition should help the company achieve significant cost and revenue synergies, supported by expanded product portfolio, a bigger customer base and better infrastructure.

In fact, the deal is expected to be immediately accretive to its earnings per share on a non-GAAP basis. 

Bottom Line

FormFactor rides on steady overall demand and good execution. The company's growing probe card demand in both Foundry and Logic markets remains a major positive. Further, its increasing focus on Mobile SoC and Mobile DRAM probe card segments continues to be a tailwind.

The company remains optimistic on strong relationships with semiconductor companies, backed by the ability to serve their electrical test and measurement requirements.

We believe FormFactor’s latest move positions it well to tap into this booming test and measurement market.

Zacks Rank & Stocks to Consider

FormFactor currently carries at a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Booking Holdings Inc. BKNG, Ambarella, Inc. AMBA and Itron, Inc. ITRI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Booking Holdings, Ambarella and Itron is currently projected at 13.08%, 11.18% and 25%, respectively.

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