Why Orbotech (ORBK) Stock Is Surging This Morning

NEW YORK (TheStreet) -- Shares of Orbotech Ltd. (ORBK) are surging, up 5.48% to $16.51, after the company agreed to acquire SPTS Technologies Group, a U.K.-based manufacturer of equipment for the microelectronics industry, from European private equity firm Bridgepoint and others for $370 million in cash, Reuters reports.

The Israel-based company makes automated optical inspection systems for producers of electronic components.

The acquisition is expected to be financed through a combination of cash and about $300 million in debt, Orbotech said today

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Orbotech said it will be able to offer solutions for a broad range of demanding micro manufacturing applications.

The deal will also expand Orbotech's presence in Europe and North America and provide SPTS with a greater reach in the Pacific region, particularly in China, Reuters said.

TheStreet Ratings team rates ORBOTECH LTD as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate ORBOTECH LTD (ORBK) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in stock price during the past year, impressive record of earnings per share growth and reasonable valuation levels. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • ORBK's revenue growth has slightly outpaced the industry average of 9.5%. Since the same quarter one year prior, revenues slightly increased by 9.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ORBK has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.46, which clearly demonstrates the ability to cover short-term cash needs.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • ORBOTECH LTD has improved earnings per share by 36.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, ORBOTECH LTD turned its bottom line around by earning $0.93 versus -$1.05 in the prior year. This year, the market expects an improvement in earnings ($1.07 versus $0.93).
  • You can view the full analysis from the report here: ORBK Ratings Report

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