Global Beta Advisors’ Company Profile of II-VI, Inc. (IIVI)

by Justin Lowry, President & CIO, Global Beta Advisors, LLC

Global Beta really likes II-VI because of its high growth potential in optoelectronics coupled with its relatively attractive valuation, despite its strong run up in performance over the past year (+140% one-year trailing 03/31/21). Optoelectronics are key components in the manufacturing of smartphones and tablets as well as the application of LED lighting, solar energy, and several vital medical tests. We believe these use cases will propel growth in optoelectronics over the next decade, especially considering the increased investments in those areas as well as expected federal government infrastructure spending. In fact, we have already seen signs of growth in the space with II-VI leading that charge:

II-VI stocks

Optoelectronic Industry Growth

Based on data from Factset Fundamental, measured from 12/31/19 through 12/31/20

  • Revenue growth in optoelectronics has increased nearly 18%, year over year, as of 12/31/20.
  • IIVI grew its market share 180% to roughly 23% of the industry, as of 12/31/20. This not only represents the largest increase in market share growth in the industry, but its current market share is now greater than the 2nd and 3rd largest companies by market share in the industry combined.
  • IIVI’s price-to-sales remains at a relatively reasonable multiple of 2.72 with a roughly 21% operating margin, as of 03/31/21.
  • Based on our calculations, IIVI would need to sustain an average annualized revenue growth rate of about 14% over the next 10 years to justify this price-to-sales multiple, which we believe to be very attainable, given the growth trajectory of the industry and its strong market share.

Data: Factset Fundamental

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