United Microelectronics (UMC) is Setting Up for a Big Move

United Microelectronics Corp (UMC) is the world’s third- largest dedicated chip foundry, with a 7% market share in 2020. The company features a diverse customer base, supplying a wide range of products applied in communications, display, memory, and automotive…

Headquartered in Taiwan, United Microelectronics Corp (UMC) operates about a dozen custom fab plants in Asia and holds approximately 14,000 chip IP patents. The firm has been focused on production for the automotive industry as semiconductors for electric and self-driving cars are expected to be a major growth driver for the company.

UMC has a strong balance sheet with $4.4 billion in cash on hand as of the most recent quarter, compared with only $185 million in short-term debt. The company also sports a high current ratio of 2.3. The firm has shown strong earnings growth with EPS growing an average of 45.1% over the past three years.

From a valuation standpoint, the stock appears slightly undervalued with a forward P/E of 18.52. Aside from the past few sessions, the stock had been trending up since late May, leading to a Momentum Grade of B in our POWR Ratings system, but over the longer term, performance has been mixed as seen in the chart below.

Take a look at the 1-year chart of UMC below with added notations…

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