COHU INC (COHU): what the price assumes

In the published model solve dated 2026-Q2, anchored at $52.44, COHU INC (COHU) is priced for today's economics sustained for ~35.2 years. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-09-07 · Exported: 2026-09-09 · Source: https://boothcheck.com/report/COHU

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Solve inputs: computed at a 11.1% cost of capital; growth searched up to the 25% self-funding ceiling.

How unusual the bet is: n/a

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.2%); the inversion above states its own rate.

Per-Model Detail (n=8)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Leverage and coverage are computed on normalized mid-cycle operating income (mid-cycle margin 0.8%); the trailing year was depressed.

Bullet Takeaways

• Six dollars in every ten that Cohu collects now come from the non-systems side of the business, the interface products, spares, kits, software and services the company groups as recurring revenue, against 40% from test and inspection systems.
• The company is still losing money where it counts: the operating line was negative through the trailing year at roughly -14.4% of sales, and even measured on through-the-cycle economics the operating margin is about 0.8%, which is close enough to zero that any multiple built on it becomes unstable.
• The first quarter of fiscal 2026 is the number to carry forward: net sales of $125.1 million against $96.8 million a year earlier, with the operating loss narrowing to 8.9% of sales from 28.2%.

Bull Case

The market is pricing Cohu as a company that lost money last year, because it did. What the recent filings actually show is a business climbing out of a trough with a different revenue mix than it went in with.

Start with the mix, because it is the part that does not reverse when the cycle turns again. In fiscal 2025 the company reported systems including kits at 40% of net sales and recurring revenues at 60%, where Recurring revenues include interface products, spares, kits (not as part of system sales), software and services. Three years earlier the split was the other way around. That matters because interface products wear out. Test contactors and sockets are consumed by the act of testing chips, so their sales track how many devices customers run rather than how many machines they buy, and the company says as much: test interface is a key contributor to our recurring revenue. Capital equipment revenue arrives in lumps tied to customer capex decisions. Consumables arrive every quarter someone's fab is busy.

The trajectory underneath is improving faster than the annual figures suggest. Fiscal 2025 net sales increased 12.7%, year-over-year, to $453.0 million. Then the first quarter of fiscal 2026 delivered $125.1 million against $96.8 million in the comparable quarter, with non-systems revenue of $75.7 million and systems of $49.4 million, and the loss from operations narrowing to $11.2 million from $27.3 million. Management attributes the shift to a specific end market, writing that net sales benefited from increased customer activity associated with AI-driven computing applications, which helped to offset ongoing weakness in automotive, industrial, and consumer-focused markets. Two of the company's three demand engines are still stalled. The revenue line is growing at nearly thirty percent anyway.

Operating leverage in this industry is severe in both directions, which is the bull's central mechanic. Cohu's cost base carried a loss at -28.2% of sales a year ago and an 8.9% loss on 29% more revenue one year later, without a corresponding jump in spending. The scaled names in the same cohort show where that curve goes: TER runs a 26.5% operating margin on $3.79 billion of revenue growing 30.3%, and CGNX converts 18.8% of $1.05 billion into operating profit. Even the mid-sized comparables clear the line, with ONTO at a 10.0% operating margin and FORM at 8.4%. None of those companies has a structurally different cost problem than Cohu; they have more volume running through the same kind of factory.

The balance sheet bought the company time to get there. In September 2025 Cohu issued $287.5 million of 1.50% convertible senior notes due 2031, used part of the proceeds to make a $29.3 million cash repayment retiring the remaining principal of its Term Loan Credit Facility, and finished the first quarter of fiscal 2026 holding $488.7 million of cash, cash equivalents and short-term investments. A 1.5% coupon on money that does not come due until 2031 is close to the cheapest financing a mid-cap industrial can get, and it removed the secured lender who would have had the most leverage during a downturn.

Bear Case

Here is the fact a holder has to sit with: measured across the whole cycle rather than at any single point in it, this business earns almost nothing. The through-the-cycle operating margin works out to roughly 0.8% of sales. Not 0.8 points below peers. Zero point eight percent, full stop, on a business that has been buying, integrating and restructuring for years. The trailing figure is worse, at about -14.4%, and that one is genuinely a trough reading. The problem is that the normalized number, the one meant to strip the trough out, is barely positive.

Compare that with the cohort and the gap is not subtle. TER converts 26.5% of revenue into operating profit and CGNX 18.8%. Further down the size scale it still holds: KLIC earns a 6.7% operating margin and FORM 8.4%, both on revenue bases under a billion dollars, so scale alone does not explain the difference. Cohu's own annual report offers part of the answer, describing a market that is relatively small in terms of worldwide market size compared to other segments of the semiconductor equipment industry, has several participants resulting in intense competitive pricing pressures. Intense pricing pressure in a small addressable market is a structural ceiling on margin, not a phase.

The cyclicality is not a background risk here either; it is the operating condition. The filing does not hedge: The semiconductor industry is highly cyclical and unpredictable. It goes further, noting that Sudden demand changes in business conditions, positive or negative, are common in our industry but the timing of such changes is very difficult to anticipate. A business converting a quarter of its revenue into operating profit can absorb a demand air pocket. One converting under a single percentage point of it through the cycle cannot, and the fiscal 2025 restructuring charges are the evidence of what the last one cost.

Now put the price against that. Every family of valuation method lands below today's quote. The methods that credit forward growth come closest, sitting about 27% under the price. Peer multiples land near half of it. The asset lens, working from book value of $16.36 a share, reaches under a third of the price, and the earnings-power methods, which capitalize normalized profit with no growth credited, land furthest away of all. That last one is the tell: when a method that simply capitalizes a company's own normalized earnings finishes that far below the market price, the market is not paying for the earnings. It is paying for the earnings that are supposed to arrive later.

How much later is the uncomfortable part. Working the price backwards into the growth it embeds, and treating the answer as directional rather than measured, today's quote implies the company sustains operating growth at the fastest pace it can fund from its own profits for something like 36 years. Roughly 14% of comparable fast-growers managed that pace for even a decade. The near-term rate is not the stretch; Cohu has delivered rates like that recently. The duration is the stretch, and duration is exactly what a highly cyclical industry does not supply. The remaining $287.5 million of convertible notes does not come due until 2031, so the balance sheet is not the near-term risk. The risk is that the recovery arrives, peaks, rolls over, and leaves the through-cycle margin exactly where it started.

Valuation

Two revenue lines carry this company, and they behave nothing alike. The non-systems line, which the filing groups as recurring revenue, is the larger of the two at 60% of fiscal 2025 net sales and consists of interface products, spares, kits, software and services. Test and inspection systems account for the remaining 40%, and that is the line that swings with customer capital budgets. A buyer at $50.65 is paying a systems-cycle multiple for a business that is now majority consumables.

What the price actually embeds is easier to see once the trough is removed. Trailing operating income is negative, so the useful comparison uses the company's own through-the-cycle economics, and on that basis the price works out to somewhere near 697 times normalized operating profit. That number is not a valuation so much as a symptom: when the normalized margin is 0.8%, the denominator is so thin that the multiple stops carrying information. Translated into time under a fixed cost of capital near 11%, it implies operating growth held at the 25% self-funding ceiling for roughly 36 years, with each percentage point of growth moving that horizon by about 3.9 years. Treat it as directional. The point is not the precise figure but the shape of what is required, which is a very long run of very good years starting from a very small base.

The methods disagree about the price without any of them defending it. The forward-growth approaches come nearest, sitting roughly 27% under today's quote, and they get there by projecting revenue growth in the low twenties with margins ramping from negative to positive over seven years. Peer multiples land near half the price. Book value, at $16.36 a share, supports less than a third of it. The earnings-power methods, which capitalize normalized profit and credit no growth at all, land furthest below. That ordering is the whole story: the price is defensible only by the methods that assume the recovery both happens and persists.

Solvency is the part of the picture that is genuinely comfortable. At the end of the first quarter of fiscal 2026 Cohu held $488.7 million of cash, cash equivalents and short-term investments, against roughly 315 million dollars of funded borrowings, leaving about 174 million dollars more liquid assets than debt on that basis. Counting lease obligations alongside the borrowings narrows the surplus considerably, but the direction does not flip into distress either way. The largest borrowing, $287.5 million of 1.50% convertible notes, matures in 2031. There is no refinancing wall in front of this recovery.

Which leaves one measurable thing standing between the balance sheet and the price. The first quarter of fiscal 2026 took the operating loss from 28.2% of sales to 8.9% on 29% more revenue. Two or three more quarters of that arithmetic put the company somewhere near the margins its cohort already earns; a stalled cycle leaves the through-cycle figure near where it has been.

Catalysts

The most recent hard datapoint is the first quarter of fiscal 2026, reported for the period ended March 28, 2026. Net sales of $125.1 million compared with $96.8 million in the same quarter a year earlier, and the loss from operations narrowed to $11.2 million from $27.3 million. Both revenue lines participated: systems of $49.4 million against $35.6 million, and non-systems of $75.7 million against $61.2 million.

The demand driver is named in the filing and it is narrow. Management wrote that net sales benefited from increased customer activity associated with AI-driven computing applications, which helped to offset ongoing weakness in automotive, industrial, and consumer-focused markets. That is a single end market carrying the recovery while the company's traditional bases stay soft. Automotive test demand turning back up would be additive rather than substitutive, and it is the swing factor most likely to change the shape of the next several quarters.

One quieter change is worth tracking. In the first quarter of fiscal 2026 no individual customer accounted for more than 10% of net sales, where a year earlier one customer represented 11%. In a business that has historically depended on a small number of buyers, a broadening base slightly reduces the risk that one customer's capital budget sets the quarter, though it also means no single relationship is now large enough to drive a step change on its own.

Peer Cohorts (Per Segment, With Filing Citations)

Semiconductor Test & Inspection (reported)

• ONTO (ONTO INNOVATION INC.)
• FY2025 10-K: …to complex measurement and process problems. We believe that customer service and technical support for our systems are crucial factors that distinguish us from our competitors and are essential to building and maintaining close, long-term relationships with our customers. We generally provide a warranty for our…
• FY2025 10-K: …portfolio includes powerful solutions for standalone tools, groups of tools, and factory-wide and enterprise-wide suites to enhance productivity and achieve significant cost savings. Our systems are backed by worldwide customer service and applications support. Semilab USA Acquisition In the fourth quarter of 2025,…
• NVMI (NOVA LTD.)
• FY2025 20-F: …manufactures to overcome new challenges in dimensions, materials and chemical engineering. The Semiconductor Market - Update According to Gartner forecasts, semiconductor revenues are expected to grow by 33% in 2026, following a growth of 21% in 2025. WFE (Wafer Fab Equipment) is expected to grow by 12% in 2026,…
• FY2025 20-F: …for both dimensions and materials. This provides the most advanced portfolio, combining the best innovative metrology capabilities with the best reliability and return on investment. • The ability to provide a unique and differentiated technology portfolio sets us apart from the competition and adds a competitive…
• CAMT (CAMTEK LTD)
• FY2025 20-F: …competitive position. We operate in a highly competitive and rapidly evolving industry that requires us to continuously develop and introduce new products that meet the changing needs and expectations of our customers and the semiconductor device manufacturing technology. Developing and introducing new products…
• FY2025 20-F: …industry will probably be influenced by weakness or uncertainties in global economic conditions. According to SEMI organization, the global total semiconductor equipment sales forecast to reach a record of $145 billion in 2026. Wafer Fab Equipment segment sales are projected reach $135.2 billion, a 9.0% increase from…
• FORM (FormFactor, Inc.)
• FY2025 10-K: …services at the time of sale, we offer services to enable our customers to maintain and more effectively utilize our products and to enhance our customer relationships. Our applications engineers assist our customers in test methodologies to make advanced measurements during process and product development, and…
• FY2025 10-K: …to our customers' unique wafer and chip designs by modifying and adapting our standard product architectures to meet each customer's specific wafer layouts, chip layouts, and electrical test requirements. We offer probe cards to test a wide range of semiconductor device types, including logic system-on-chip (SoC)…
• TER (TERADYNE, INC.)
• FY2025 10-K: …the current segment structure and presentation requirements. The Semiconductor Test segment includes operations related to the design, manufacturing and marketing of semiconductor test products and services inclusive of storage and system level test products. The Robotics segment includes operations related to the…
• FY2025 10-K: …to $18.3 million. AET adds resources and expertise to our company and strengthens the relationship between us and this key customer. AET is included in our Semiconductor Test segment. Our financial statements are denominated in U.S. dollars. While revenues in our test businesses are predominantly in U.S. dollars, the…
• AEHR (AEHR TEST SYSTEMS)
• FY2025 10-K: -power reliability burn-in, and the Echo series for low-power and high parallelism testing. The Sonoma line, with its ultra-high-power capabilities, is specifically designed to address the reliability and burn-in needs of the burgeoning demand for AI accelerators, GPUs, HPC processors, and devices that can reach…
• FY2025 10-K: …resources than us. Our FOX wafer-level and singulated die/module test and burn in systems and packaged part burn-in systems face competition from larger systems manufacturers that have significant technological know-how and manufacturing capability. Some users of our systems, such as independent test labs, build…
• KLIC (KULICKE AND SOFFA INDUSTRIES, INC.)
• FY2025 10-K: …and Israel. We both produce and outsource the production of our bonding wedges. Our China and Israel facilities are ISO 9001, ISO 14001 and ISO 45001 certified. Research and Product Development Many of our customers generate technology roadmaps describing their projected packaging technology requirements. Our…
• FY2025 10-K: …circuits, power discretes, light-emitting diode ("LEDs"), and sensors. We also service, maintain, repair and upgrade our equipment and sell consumable aftermarket solutions and services for our and our peer companies' equipment. Our customers primarily consist of integrated device manufacturers ("IDMs"), outsourced…
• CGNX (Cognex Corporation)
• FY2025 10-K: …package. Vision Systems and Sensors Vision systems combine smart cameras and software to perform a wide range of tasks, including part location, identification, measurement, assembly verification, and robotic guidance. Vision sensors can deliver an easy-to-use, low-cost, reliable solution for simple pass/fail…
• FY2025 10-K: …growth in the packaging market will be driven by increasingly stringent regulations around traceability, quality, and compliance, making machine vision solutions valuable for manufacturers. We believe these regulatory requirements are accelerating the adoption of advanced inspection technologies to help ensure…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.