Dear Mr. Berko: Our daughter is married to an engineer who recently went to work for Rudolph Technologies in New Jersey. He recently advised us to buy $10,000 worth of the stock. We don’t understand what his company does, but he is adamant that we buy this stock. He said he owns 1,670 shares. Unfortunately, we’d have to sell our 300 shares of Pfizer to buy Rudolph Technologies. Please tell us what you think we should do.
Dear CC: Rudolph Technologies (RTEC-$24) came public at $16 in 1999 and hasn’t done diddly since. Your son-in-law’s recommendation of the company is, in the words of Winston Churchill, a riddle wrapped in a mystery inside an enigma.
I have zero feeling for RTEC, On its website, the company states: “Rudolph Technologies Inc. is a leader in the design, development, manufacture and support of defect inspection, lithography, process control metrology, and data analysis systems and software used by microelectronic device manufacturers worldwide.” I have no bleeding idea what “process control metrology” is.
However, I can tell you that between 2007 and 2016, RTEC’s dinky revenues grew by 4 percent annually, from $160 million to $236 million. During that 10-year time frame, RTEC’s operating margins doubled, to 14.8 percent. In 2007, RTEC had revenues of $160 million, earning 61 cents a share. This year, RTEC expects to report revenues of $240 million and earn 94 cents a share. RTEC has no debt, holds $138 million in cash and refuses to pay a dividend. There are only 31 million shares outstanding. Levered free cash flow is $49 million, while its book value is $9.89. And the shares have a low beta of 0.85, suggesting that they are less volatile than the market.
RTEC is a small-cap ($785 million), slow-growth technology company with 580 employees and an impressive institutional ownership. Zacks…