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Anatomy of Success: MKS Instruments (MKSI)

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Stocks that boast a Zacks Rank #1 (Strong Buy) title have a long and demonstrable history of outperforming the market over a one to three-month time period. And, this unique ranking is only bestowed upon the top 5% of all stocks within the Zacks Rank universe.

Not only does this stock-picking system help identify the most elite stocks, but it also enables investors to hold a particular company while shares continue to gain in value beyond that three-month investment horizon.

Below is an example that shows investors how they could have realized an almost 60% gain in less than a year by following the Zacks Rank.

MKS Instruments (MKSI - Free Report)

Based on Andover, MA, MKS Instruments makes and designs the instruments, subsystems, and process control solutions that enable customers to measure, control, power, monitor, and analyze critical parameters of advanced manufacturing processes to improve process performance and productivity. They are a global company, and its products primarily serve these markets: manufacturers of capital equipment for thin film including semiconductor devices, process manufacturing, environmental, life sciences and scientific research.

On April 28, MKSI was added to the #1 (Strong Buy) list after announcing impressive first quarter fiscal2017 results. Overall, the company achieved new quarterly records for total semiconductor and non-GAAP net earnings, with EPS soaring past the Zacks Consensus Estimate. Revenues of $437 million grew 33% year-over-year, and semiconductor revenue and sales to other advanced markets jumped 54% from the prior-year period. At the closing bell that day, the company’s stock price was $78.25 per share.

During the next earnings season, MKSI reported solid second-quarter results. While Q2 has not as hot as Q1, the company’s numbers still delivered. Non-GAAP earnings matched the Zacks Consensus and hit a record quarterly record again, while revenues grew 34% to $481 million, beating our consensus estimate. Additionally, MKSI realized initial cost synergies ahead of schedule, and greatly improved its revenue growth profile and profitability of the Light and Motion Division. The company hit Strong Buy territory just a few days after this earnings release on July 28, and four months after becoming a #1 pick, MKSI increased 6.5% to $83.35 per share.

While MKSI didn’t report its third quarter earnings until October 24, the company was added to the #1 (Strong Buy) list two separate times before that date, on August 11 and on September 1. During Q3, MKSI received a ratings upgrade from Moody’s Investors Service, and it made a voluntary $75 million pre-payment on its term loan. These two events likely helped bolster analyst bullishness. Five and six months after first becoming a #1 pick, shares of MKS Instruments increased 1.5% to $79.45 per share and 7% to $83.70 per share, respectively.

The company’s third quarter was another strong one, with earnings and revenues both surpassing the Zacks Consensus. Revenues surged 28%, and its Light and Motion Division hit a new quarterly record. Non-GAAP gross margin came to 46.9% and operating margin was 25.5% for the quarter, both increasing on a sequential basis. MKSI already was a Zacks Rank #1 heading into this report, and had no trouble maintaining this rank for a long stretch afterwards. Nine months after becoming a #1 pick, MKSI increased almost 30% to $101.10 per share.

Right now, MKSI is a Zacks Rank #2 (Buy), and is trading around $123.50 per share.

This table shows the price performance of MKSI (in red), as well as the 12-month forward looking EPS estimate (in green) from the time the stock first earned a Zacks Rank #1 (Strong Buy). During this stretch, MKSI never moved lower than a Zacks Rank #3 (Hold).

By utilizing the Zacks Rank, investors are able to easily identify elite stocks that are best positioned to beat the market on a consistent basis, and how to hold those top stocks as they continue to grow.

Zacks Editor-in-Chief Goes "All In" on This Stock

Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report. Download it free >>




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