Universal Display Corporation 124,93 -10,41 -7,69% (OLED) is an American company, founded in 1994. It develops, researches, manufacturers and markets the basic resources to create OLED screens. It also has the largest portfolio for OLED patents, with over 5.000 patents. The customer base exists of companies such as Samsung, LG, Xaomi. UDC has offices in 7 countries, with about 311 employees globally. Their headquarters are in Ewing, New Jersey, USA.
Universal Display Corporation (in trading it is more commonly known as OLED) is an interesting investment opportunity, because according to research organization Stratistics MRC the OLED display market will be approximately worth 81.76 billion USD in 2026, coming from 19.45 billion USD in 2017. The applications where OLED technology is used is also increasing and the production costs are going down (for the new upcoming trend of foldable phones, OLED display technology is necessary and eco-friendly lighting is made with OLED). This is all in favor for Universal Display Corporation, and most likely they will see an increase in sales as it is one of the few OLED display resource suppliers.
UDC has a market capitalization of 8.11 billion USD. At the moment of writing, it has a share price of 172.36 USD. Last year (2019), it had a net decrease in cash and cash equivalents of 79.39 million USD, resulting in a total cash and cash equivalents of 131.63 million USD. The decrease in cashflow was mostly due to large investment purchases, such as property and equipment in Ewing and the timing of maturities of some operational leases. These leases reached 3.8 million USD annually maximum. Furthermore, UDC has invested approximately 21.3 million USD in R&D in three months ending June 30th 2020 and it made a positive cashflow of 1.94 million USD.
For long term investing, dividends are highly important and this also partly makes the price of a share. Looking at USD, it has a dividend of 0.60 USD per share per quarter, this is with a dividend yield of 0.36%. Looking at the dividend yield history, there is a clear dividend growth, from about 0.1% in 2017 to now 0.36% in 2020. This is however still relatively low for the semi-conductor industry.
Looking at the EPS of UDC today, it is 2.16 USD; the expected EPS for next year is 3.90 USD. There is an expected EPS growth of 28.59% for the next 5 years. These are not high but also definitely not low growth rates compared to the industry as a whole.
The company has a predicted EPS of 3.90 USD for next year, from 2.16 USD nowadays and this would be an increase of 80%. UDC also has a P.E.G of 2.68, which is average for the industry.
UDC has a ROA of 9.10% which is higher than many other in the industry. However, looking at the past ROA, this is not very low nor high, as in March 2020 UDC still had a ROA of 13.30%. It has a ROE of 12.40%, this is not very high nor low compared to others in the industry. It is not performing poorly however, but the company is not performing at its best either as last March it had a ROE of 18%. UDC has a ROI of 15.60% which is relatively high for the industry. Looking at the current and historic ratio’s, it can be concluded that the company, like many others, has also been hit by the aftermath of the COVID-19 crisis.
UDC has a debt to equity ratio of 0, as it does not have any debt. It also has a quick ratio of 4.60, meaning that the company can easily get rid of assets that are easily transformed in near-term cash, to pay its current liabilities.
To conclude, UDC is a relatively small company with only 311 employees. It has no debt, and good quick ratio, thus it runs little risk becoming unsolvable as a company. On the other hand, it cannot grow very fast without using debt. It has many patents, which are recently renewed, securing that the technology stays property of UDC for a long time. Furthermore, according to Stratistics MRC, the market for OLED displays and other functions will increase to more than 81 billion USD in 2026, creating a big market for the company. In addition, as it has more than 5.000 patents.
Although there was a net decrease in cash in 2019 due to equipment and property purchase and timing of maturities of operational leases. The latter is not a good sign, as this does not clearly shows up on the balance sheet and can potentially have a huge impact on the actual cashflow. However, looking at the average cashflow, the company can handle this debt and has in overall a good cashflow. UDC gives out dividends, which are increasing year-over-year. For these reasons it is a good long-term buy.
Max Ritt has over 4 years experience with trading and analyzing ETFs and shares. He predicted the economic implications of the election of president Trump and the BREXIT well ahead of others. Recently he started the MaxRitt.nl webpage where he blogs mainly about investing.
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