Is United Microelectronics (UMC) Setting Up for a Big Move?

United Microelectronics Corp. (UMC) is the world’s third- largest dedicated chip foundry, with a 7% market share. The company features a diverse customer base including Texas Instruments (TXN), MediaTek, Qualcomm (QCOM), Broadcom (AVGO), Xilinx (XLNX), and Realtek, supplying a wide range of products applied in communications, display, memory, automotive and more…

On Monday, United Microelectronics Corp. (UMC) reported its sales for June. Revenue came in at $17.3 million, which was a 18.9% year over year increase from the same month last year. In addition, the global chip shortage may provide the company an opportunity to gain market share from bigger players in the industry.

As of the most recent reported quarter, UMC had $4.4 billion in cash which compares very favorably to only $185 million in short-term debt. The company also has a solid net profit margin of 17.1%. In terms of growth, UMC has grown earnings an average of 34.3% per year over the past five years.

Analysts expect earnings to surge 180% year over year next quarter. From a valuation standpoint, the stock appears a bit undervalued with a forward P/E of 17.79. The stock is up 11.6% for the year, but has shown mixed performance since February as noted in the chart below.

Take a look at the 6-month chart of UMC below with added notations…

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