Chip Gear Maker Entegris has potential, but is it buyable now?

Entegris (NASDAQ: ENTG)

is an example of a business that provides products or services to another industry and can benefit from the growth of that industry. For example, copper producer Freeport McMoRan (NYSE:FCX) sells to producers of electric vehicles, which can boost its fortunes.

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Entegris develops, manufactures and markets micro-contamination control products, specialty chemicals and advanced materials handling solutions for industry semiconductors, and others. It serves a global clientele.

Like many other companies, it has undergone a correction since the end of last year. Stocks are down 30.61% so far this year, and there haven't been many short-term gains to satisfy investors.

So what's to love about this stock?

The analyst consensus rating is a "Moderate Buy", as you can see on MarketBeat's analyst ratings page. Price target is $146.10, up 53.98%.

This optimism is fueled by double-digit earnings and revenue growth over the past eight quarters. Last 12 months revenue was $2.56 billion, reflecting growth over the past two years. Wall Street expects earnings per share of $4.24 this year, which would represent a 23% increase. Next year, that number is expected to rise another 14%, to $4.85 per share.

Of course, anything semiconductor is known to be cyclical, so these estimates may change. But for now, the fundamentals look promising.

The company released its second quarter results on August 2. Among the highlights:

Sales rose 21% from the year-ago quarter to $692.5 million, beating consensus estimates, as you can see using MarketBeat's earnings data for the stock. Adjusted gross margin contracted by 160 basis points to 44.8%, and adjusted operating margin was essentially flat at 26.4%. This is not the kind of news that makes big investors happy. Earnings of $1.00 per share beat analysts' consensus estimate of $1.05 per share. Again, this is not something investors like to see. Entegris generated $110.9 million in operating cash flow and held $2.7 billion in cash and cash equivalents.

In a statement accompanying the earnings release, CEO Bertrand Loy said, "Sales growth and operational execution were again very strong in the second quarter... Non-GAAP EPS was slightly lower our expectations in the second quarter, mainly due to a significant drop in a few major currencies against the US dollar."

The company had sales of $1 billion to $1.04 billion in the current quarter, which is above the consensus estimate of $811.2 million.

Shares of Entegris slipped 3.79% in the week of the report and fell 13.67% in August.

Sparkle with the market

Overall, semiconductor equipment makers lost ground alongside the broader market, as a recovery attempt failed in mid-August.

The stronger dollar has affected other stocks in this industry besides Entegris. For example, the largest semiconductor equipment maker, by market capitalization, is the Dutch company ASML Holding (NASDAQ: ASML).

This stock fell 14.71% in August. It initially rose after its last earnings report on July 20, but peaked as the broader market stumbled.

However, analysts identify specific issues facing the company. On August 29, Morningstar's Abhinav Davuluri wrote, "Based on the recent strengthening of the US dollar against the euro (with the two currencies effectively at par), we are lowering our USD-denominated fair value estimate for the 'ASML wide moat at $696 per share. from $761 per share."

Davuluri added that he maintained the fair value estimate in euros of EUR 696 per share.

Analysts have a “moderate buy” rating on the stock, according to data from MarketBeat. The consensus price target is $777.43, a potential upside of 62.80%.

Secondary investors are aware that semiconductor manufacturing and related services tend to go through boom and bust cycles. However, like in most industries, there is a broader market tracking element that...