COHU INC (COHU): what the price requires

At today's price, COHU INC (COHU) is priced for today's economics sustained for ~36.3 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-19 · Source: https://boothcheck.com/report/COHU

Headline

FieldValue
TickerCOHU
CompanyCOHU INC
Current price$53.04/sh

What The Price Requires (Inversion)

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

FieldValue
Inversion basiswhole-company
Operating margin (mid-cycle)0.8%
Trailing margin (depressed year)-14.4%
Must persist for36.3y
Multiple paid728x mid-cycle operating income

Solve inputs: computed at a 11.1% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~4 years.

Reconcile: at the x-ray's 9.3% required return this reads ~29.7 years; the models below use their own rates.

How unusual the bet is: elevated

ReferenceValue
vs own history-0.28σ
sustained it ~10 years at this level14%
implied end-window share1%

Valuation X-Ray

Every valuation family lands below the price. The price therefore requires assumptions beyond what those standard frames encode.

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.

FamilyMedian price/FVModelsReads
Asset3.42x2expensive
Earnings9.03x2expensive
Relative2.07x2expensive
Growth1.34x3expensive

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=9)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$39.521.34xyesFCF base $0.0B, growth 24% (input: historical growth), terminal g 4.0%, WACC 8.2%, 7yr projection
DCF Exit MultipleGrowth$0.00—noNegative/zero FCF or EBITDA — equity value floored at $0
Relative ValuationRelative$25.602.07xyesP/S fallback (negative EPS): Sector P/S 2.5x × TTM revenue — excluded from consensus
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$16.363.24xyesBook value floor: BV/sh $16.36, ROE negative
Two-Stage Excess ReturnAsset$14.733.60xyesBook value with convergence: BV/sh $16.36, ROE converges to ke
Discounted Future Market CapGrowth$62.200.85xyesRev $0.5B, growth 24% (input: historical growth; tapered), Terminal P/S: 4.2x / 5.2x / 6.2x (bear / base = today's held flat / bull, cap 12x)
Peter Lynch Fair ValueRelative$0.00—noNegative/zero EPS — earnings-based value floored at $0
Margin TrajectoryGrowth$32.571.63xyesMargin ramp: -12% → 12% over 7yr, rev growth 24% (input: historical growth; tapered)
Earnings Power ValueEarnings$5.2310.14xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.04B × (1−21%) / WACC 8.2% → EPV (no growth)
Residual IncomeAsset——no—
Graham NumberAsset——no—
EV/EBITDA RelativeRelative——no—
FCF YieldEarnings$6.707.92xyesFCF $40.2M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$1.3938.16xyesSBC-adj FCF $0.02B (FCF $0.04B − SBC $0.02B) capitalized at Kₑ (excluded from median)
Ben Graham FormulaEarnings——no—
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative$25.602.07xyesRevenue $0.48B × sector P/S 2.5x
PEG Fair ValueRelative——no—
Earnings YieldEarnings——no—
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net cash$173.8m
Net debt / NOPAT (after-tax)-60.65x (net cash)
Net debt / operating income (pre-tax)-47.92x (net cash)
Interest coverage1.8x
Share count CAGR (buyback)-1.3%
Burning cashno

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

Bullet Takeaways

Cohu makes semiconductor test and handling equipment, a deeply cyclical business now inflecting off a trough: the trailing operating margin is still negative (about -11%), but first-quarter 2026 orders rose 57% year over year and semiconductor test orders surged 163%.

The price assumes the recovery, not the trough. At $69.42 the stock trades around 4.2x book value of about $16 per share, and no static valuation method reaches the price because the methods anchor to depressed trailing earnings. The bet is that margins and revenue ramp back up.

Management raised full-year 2026 revenue growth guidance to 20% to 25% and pointed to a $750 million computing pipeline and growing high-performance-computing and HBM-inspection revenue. The balance sheet is net cash. The risk is that the semiconductor capital-equipment cycle is unpredictable and the recovery is already priced in.

Bull Case

The earnings trajectory is the entire bull case, and it has clearly turned. Cohu spent the last two years in a semiconductor-test downturn, with revenue and margins compressed to the point where the trailing operating margin is still around negative 11%. But the direction of travel reversed in early 2026. First-quarter revenue of $125.1 million came in above the midpoint of guidance, total orders rose 57% year over year, and the key segment, semiconductor test, saw orders surge 163% year over year, principally from computing demand. Test utilization, the cleanest leading indicator for a test-equipment maker, rose sequentially to 78% at quarter-end, the level at which customers start ordering new capacity rather than running existing tools harder. When orders inflect this sharply and utilization climbs toward the high 70s, revenue and margins follow with a lag, and the operating loss in the trailing numbers is a snapshot of where the business was, not where it is heading.

The recovery is being driven by structural demand, not just a cyclical bounce. Cohu has identified a $750 million opportunity pipeline in the computing segment, split between roughly $650 million in test handlers and $100 million in high-bandwidth-memory inspection, and raised its 2026 high-performance-computing revenue outlook to about $80 to $100 million. Its HBM inspection platform is forecast to grow 80% year over year, and inspection and metrology orders grew 64% year over year. These are the parts of the semiconductor equipment market tied to AI compute and memory, the fastest-growing end demand there is, and Cohu is positioned in the back-end test and inspection step that scales with chip complexity. The company notes that next-generation technologies introduce higher complexity and more demanding test strategies (FY2025 10-K, accession 0001437749-26-004339), which is the long-run tailwind: more complex chips need more test, more handling, and more inspection per unit.

The business quality and balance sheet support holding through the cycle. Cohu is shifting toward higher-margin, recurring software revenue, with software bookings projected to more than double, which over time smooths the famous lumpiness of capital-equipment sales. The balance sheet is net cash, about $174 million, so the company can fund development and modest buybacks through the trough without financial strain, and it has been buying back a small amount of stock. Management raised full-year 2026 revenue growth guidance to 20% to 25% on the strength of the order book. For an investor who believes the semiconductor test cycle has bottomed and that AI-driven complexity is a durable tailwind, Cohu offers a leveraged recovery: depressed trailing margins that should expand fast as volumes return, a concrete computing pipeline, and the financial strength to wait. The forward-looking methods that ramp the margin back toward normal land well above the trailing-anchored ones for exactly this reason.

Bear Case

The recovery the bull case describes is already in the price, and that is the most fragile assumption baked into the stock. At $69.42 (June 27, 2026), Cohu trades at roughly 4.2x book value of about $16 per share while still losing money at the operating line, which means the market has already priced a full return to mid-cycle or better margins. No static valuation method reaches the price; the engine flags it as elevated, with the price a bet beyond what any standard frame supports. The specific assumption most likely to break is the margin ramp. The forward methods that justify the price assume the operating margin climbs from roughly negative 12% back toward 12% over several years. That is a 24-point swing that requires not just an order recovery but sustained pricing and operating leverage, in a business the company itself describes as highly cyclical and unpredictable, where capital-equipment providers have been negatively impacted by both sudden downturns and capacity over-builds (FY2025 10-K, accession 0001437749-26-004339).

The revenue base is structurally lumpy and concentrated, which makes the assumed straight-line recovery unrealistic. Cohu's revenue is primarily driven by customers' capital expenditures and operating budgets, which fluctuate significantly with their business conditions (FY2025 10-K, accession 0001437749-26-004339). Order surges of 163% off a low base are the norm in this industry, in both directions; the same dynamic that produces a 57% order increase one year can produce a sharp decline the next if hyperscaler or memory customers pause spending. The 163% test-order growth is impressive precisely because the prior-year base was so depressed, and the durability of the computing pipeline depends on an AI capital cycle that several other names in this report also lean on. If that cycle cools, the recovery flattens and the stock has no earnings to fall back on.

The competitive position adds pressure on the margin assumption. Cohu competes against larger, established players including Advantest, Teradyne, Hon Precision, and KLA, plus Asia-based manufacturers (FY2025 10-K, accession 0001437749-26-004339), in a market it describes as relatively small with several participants and intense competitive pricing pressures, with emerging companies offering innovative technology (accession 0001437749-26-004339). A sub-scale player squeezed between bigger competitors has limited pricing power, which is the opposite of what a 24-point margin recovery requires. The net-cash balance sheet protects the company from distress, but it does not make a 4x-book, recovery-priced stock cheap. A buyer here is paying full price for a recovery that has started but is far from complete, in a cyclical, competitive business where the next downturn is a question of when, not if.

Valuation

Cohu is a cyclical at the bottom of its cycle, so the trailing-anchored methods are uninformative and the forward-looking ones carry the weight. With a trailing operating margin around negative 11% and negative EPS, the earnings-based methods collapse (the earnings-power and FCF-yield reads land in the single digits as artifacts), and the asset floor, the book-value reads, lands near $15 to $16. The forward methods that assume a recovery land far higher: the discounted-future-market-cap read near $81, the margin-trajectory model near $33 (ramping margin from negative 12% to positive 12% over seven years), and the perpetual-growth DCF near $37. The relative and sector price-to-sales reads land near $26. At $69.42 the stock sits above all of them except the most optimistic future-market-cap read, which is why the engine characterizes the valuation as elevated and the inversion as a capped-extreme: the price requires an extraordinary multiple on trough earnings.

The honest frame is mid-cycle earnings power. Cohu's revenue is recovering toward a roughly $600 million-plus annual run-rate on the 20% to 25% growth guidance, and at a normalized mid-cycle operating margin in the low-to-mid teens that implies a meaningful earnings recovery from the current loss. The question is what multiple to pay for that recovery before it arrives. At 4.2x book and above nearly every model with the business still losing money, the stock is pricing the recovery as substantially complete. If mid-cycle margins land where the bulls expect and the AI-driven complexity tailwind is durable, the forward methods near $33 to $81 bracket a defensible range and the high end can be justified. If the recovery stalls or the next downturn arrives early, the trailing-anchored reads near $16 to $26 are the gravity. The net-cash balance sheet limits the downside to the business, not the multiple; the stock is a recovery bet priced for the recovery to succeed.

Catalysts

First-quarter 2026 was the recent set-piece and it showed the cyclical inflection: revenue of $125.1 million, above the midpoint of guidance, with total orders up 57% year over year and semiconductor test orders up 163% year over year, principally from computing demand. Semiconductor test utilization rose sequentially to 78% at quarter-end, a leading indicator of new equipment orders. (Sources: Cohu Q1 2026 earnings call transcript via The Motley Fool and AOL; Q1 2026 highlights via Yahoo Finance.)

Management raised guidance for both the second quarter and full-year 2026, lifting full-year revenue growth guidance to 20% to 25%. The company pointed to a $750 million computing opportunity pipeline ($650 million in test handlers, $100 million in HBM inspection), raised its 2026 high-performance-computing revenue outlook to about $80 to $100 million, and forecast its HBM inspection platform (Neon) to grow 80% year over year to about $20 million, with inspection and metrology orders up 64% year over year. (Sources: Cohu Q1 2026 earnings detail via Yahoo Finance and Alpha Spread.)

The forward watch items are cycle- and execution-driven: whether the order momentum sustains or proves to be a low-base bounce, the pace of margin recovery toward mid-cycle levels, the conversion of the computing and HBM pipeline into revenue, the ramp of recurring software bookings, and the broader AI capital-spending cycle that drives the computing demand. Each quarterly order and utilization figure is the key recurring signal, since the recovery thesis is already priced in. (Sources: Cohu Q1 2026 commentary via The Motley Fool; Cohu FY2025 10-K cyclicality and competition disclosures.)

Peer Cohorts (Per Segment, With Filing Citations)

Semiconductor Test & Inspection (reported)

Methodology Note

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.

View the full interactive COHU report on boothcheck