Tom Nash

Episode 12 out of 30 - Inflation Stocks

Added 2021-12-21 11:36:19 +0000 UTC

This is the 12th out of 30 companies in our 2022 inflation proof list. Rest of companies will be completed by end of this month.

The company is Renesas Electronics - RNECF.

This is a 23-billion-dollar semiconductor company focusing on auto industry and industrial/infrastructure/IoT businesses.

At the current $12 price its an attractive long-term inflation proof investment.

High demand and supply chain shortages will allow price increases to sustain profitability during inflationary price swings while the underlying business is expected to benefits from strong fundamental growth.

a. Price: Only 19% stock growth in 2021 - underperformed.

b. Margins: 50% gross margins, 25% EBITDA and 9.5% net income margin.

c. Growth: Grew 22% in 2021 and expected to grow 25.6% in 2022.

d. Valuation: EV SALES: 3.7, EV EBITDA 15 – undervalued

e. Revenue: 8 billion in sales in TTM

f. Balance sheet: 2 billion in cash, 21 billion in assets, 11.5 liabilities.

RISK! - high debt at 8 billion USD. - mitigation: 2X assets to liabilities + strong cashflow.

RISK2! - strong competition in MCU industry: NXPI, TXN and STM - mitigation: irrelevant in 2022 and 2023 due to hard line demand and shortage - if you can make it they will buy it.

Given the 2021 underperformance of the share, I expect this to be a solid 2022 play despite inflation.