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Tokyo Electron Ltd (TOELY)
OTHER OTC:TOELY
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Tokyo Electron
(OTC:TOELY)
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Rating:79Outperform
Price Target:
$161.00
▲(23.62% Upside)
Action:ReiteratedDate:02/19/26
The score is driven primarily by strong financial quality (high margins, strong ROE, and very low leverage) and supportive technical momentum (price above key moving averages with positive MACD). This is tempered by a relatively expensive valuation (P/E ~37) and some cyclicality/cash-conversion headwinds reflected in recent TTM growth and FCF-to-earnings conversion.
Positive Factors
Balance Sheet Strength
Tokyo Electron’s exceptionally low leverage and historically high returns on equity provide durable financial resilience. This capital strength reduces refinancing risk, funds multiyear R&D and capex cycles, and allows the company to invest in service networks and strategic initiatives through downturns.
High and Stable Margins
Consistently high gross and net margins reflect pricing power and efficient operations in semiconductor equipment. Strong margins sustain profitability across cycles, enable continued R&D and product development, and provide a durable earnings buffer versus competitors during demand swings.
Robust Free Cash Flow
Meaningful and growing free cash flow demonstrates the company's ability to convert operating performance into liquidity. Reliable FCF supports capital investments, maintenance of the installed base, shareholder returns, and provides optionality to weather lumpy equipment cycles without heavy reliance on external financing.
Negative Factors
Cyclical Revenue Volatility
Revenue is closely tied to semiconductor capital expenditure cycles and technology-node upgrades, creating persistent top-line volatility. This cyclicality can lead to lumpy order timing, underutilized capacity during downturns, and challenges in multi-quarter revenue and staffing planning.
Suboptimal Cash Conversion
Free cash flow materially below net income and OCF trailing net income indicate working-capital or timing exposures. Such conversion gaps can constrain funding for capex or services during downturns, increase sensitivity to receivable/inventory swings, and reduce near-term financial flexibility.
Concentration & Equipment Reliance
The business depends heavily on large, lumpy capital-equipment orders from a concentrated set of semiconductor customers. This structural reliance raises exposure to a few buyers and to product-mix shifts, limiting predictability of growth even as services provide more recurring revenue.
Tokyo Electron (TOELY) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$126.80B
Dividend Yield1.78%
Average Volume (3M)12.36K
Price to Earnings (P/E)38.4
Beta (1Y)1.50
Revenue Growth17.58%
EPS Growth16.78%
CountryUS
Employees17,702
SectorTechnology
Sector Strength88
IndustrySemiconductors
Share Statistics
EPS (TTM)0.88
Shares Outstanding943,265,440
10 Day Avg. Volume7,736
30 Day Avg. Volume12,359
Financial Highlights & Ratios
PEG Ratio0.34
Price to Book (P/B)5.09
Price to Sales (P/S)3.89
P/FCF Ratio22.81
Enterprise Value/Market Cap151.55
Enterprise Value/Revenue8.02
Enterprise Value/Gross Profit17.64
Enterprise Value/Ebitda26.61
Forecast
1Y Price TargetN/A
Price Target UpsideN/A
Rating ConsensusN/A
Number of Analyst Covering0
EPS Forecast (FY)3.82
Revenue Forecast (FY)$15.58B
Tokyo Electron Business Overview & Revenue Model
Company DescriptionTokyo Electron Limited, together with its subsidiaries, develops, manufactures, and sells semiconductor and flat panel display (FPD) production equipment in Japan, Europe, North America, Taiwan, China, South Korea, and internationally. The company's Semiconductor Production Equipment segment offers coaters/developers, etch systems, deposition systems, and cleaning systems used in wafer processing; wafer probers used in wafer testing process; and wafer bonders/debonders. Its Flat Panel Display Production Equipment segment provides coaters/developers and etch/ash systems for use in the manufacture of FPDs, as well as inkjet printing systems for manufacturing OLED panels. The company also offers logistic, facility maintenance, and insurance services. Tokyo Electron Limited was incorporated in 1951 and is headquartered in Tokyo, Japan.
How the Company Makes MoneyTokyo Electron generates revenue primarily through the sale of its semiconductor and flat panel display manufacturing equipment. Its key revenue streams include the sale of new equipment, maintenance services, and spare parts. The company also benefits from long-term partnerships and alliances with major semiconductor manufacturers and technology firms, which ensure a steady demand for its products. Tokyo Electron's earnings are further supported by its investment in research and development, enabling the company to continually innovate and maintain its competitive edge in advanced manufacturing technologies. Additionally, the company's global reach and strategic positioning in key markets contribute to its revenue growth and stability.
Tokyo Electron Earnings Call Summary
Earnings Call Date:Apr 30, 2025
(Q4-2025)
| % Change Since: |
Next Earnings Date:Aug 06, 2026
Earnings Call Sentiment Positive
The earnings call highlighted significant financial achievements, with record-breaking revenue and growth in key segments like DRAM and HBM. However, challenges such as quarterly declines in profit margins, decreased sales in China, and potential impacts from new tariffs were noted. Despite these lowlights, the positive outlook for fiscal 2026 suggests continued growth.Q4-2025 Updates
Positive Updates
Record-Breaking Financial Performance
Net sales reached ¥2,431.5 billion, a 32.8% increase year-over-year. Operating income was ¥697.3 billion, a 52.8% increase, and net income was ¥544.1 billion, a 49.5% increase year-over-year. Gross profit exceeded ¥1 trillion for the first time with a margin of 47.1%.
Strong DRAM and HBM Growth
Sales to DRAM customers increased by 59% year-over-year, driven by demand for advanced technologies such as HBM. The company also increased its market share in DRAM.
Expansion in Etch Systems Market
The company increased its market share in etch systems by 6 percentage points year-over-year, driven by winning 100% mass-production PORs for critical processes.
Successful Share Repurchase
Conducted a share repurchase of about ¥150 billion in total, benefiting shareholders.
Positive Outlook for Fiscal 2026
Net sales for fiscal 2026 are expected to increase by 6.9% to ¥2,600 billion, with record high net sales and operating income anticipated.
Negative Updates
Quarterly Decline in Key Metrics
In the fourth quarter, gross profit declined by 0.4% and net income decreased by 9.1% from the previous quarter, with operating profit margin dropping by 2.5 percentage points.
Decreased Sales in China
Sales to China declined by 8.4 percentage points from the previous quarter to 34.3%, due to shipment timing and reduced capital investment by emerging customers.
Challenges in Profit Margins
Operating profit margin decreased by 3.8 percentage points year-over-year, impacted by increased R&D expenses and SG&A costs.
Potential Impact of Tariffs
Concerns about the impact of newly announced tariffs by the U.S. government on customer investment attitudes, particularly in China.
Company Guidance
During the call, Tokyo Electron provided comprehensive guidance for the fiscal year ended March 2025, outlining significant financial achievements and future expectations. The company reported net sales of ¥2,431.5 billion, a 32.8% increase year-over-year, with gross profit surpassing ¥1 trillion for the first time at ¥1,146.2 billion, resulting in a gross profit margin of 47.1%. Operating income reached ¥697.3 billion, reflecting a 52.8% increase, while net income attributable to owners was ¥544.1 billion, up by 49.5%. The return on equity (ROE) was 30.3%. Tokyo Electron also highlighted their robust R&D and capital expenditures, with R&D expenses totaling ¥250.0 billion, a 23.2% increase, and capital expenditures amounting to ¥162.1 billion. Looking ahead, the company anticipates net sales of ¥2,600 billion for fiscal 2026, representing a 6.9% growth, with plans to invest ¥300 billion in R&D. The guidance also touched on the company's strategic focus areas, including advanced logic for AI servers, HBM, and emerging technologies such as cryogenic etching and wafer bonding, aiming to capitalize on the expected growth in the WFE market driven by AI-related investments.Tokyo Electron Financial Statement Overview
Summary
Strong overall fundamentals supported by excellent profitability and an exceptionally strong, low-leverage balance sheet. The main offsets are cyclical revenue softness (TTM revenue growth -3.7%) and less-than-perfect cash-flow conversion (FCF ~57% of net income).Income Statement
Tokyo Electron shows strong profitability with high and consistent margins (TTM (Trailing-Twelve-Months) gross margin ~45% and net margin ~21%). Earnings power remains solid with healthy EBIT and EBITDA margins around ~27%–31% in recent periods. The key weakness is growth volatility: revenue shifted from strong expansion earlier in the cycle to a modest decline in TTM (Trailing-Twelve-Months) revenue growth (-3.7%), reflecting a softer semiconductor capex environment.84
Very Positive
Balance Sheet
The balance sheet is a major strength, highlighted by very low leverage (TTM (Trailing-Twelve-Months) debt-to-equity ~0.04; near-zero in recent annual periods) and a large equity base. Returns on equity are strong (roughly ~21%–32% historically; ~26% TTM (Trailing-Twelve-Months)), indicating efficient capital use. The main drawback is that profitability can swing with the cycle, so returns may normalize if demand weakens, but overall financial risk from debt appears minimal.93
Very Positive
Cash Flow
Cash generation is healthy with positive operating cash flow and robust free cash flow (TTM (Trailing-Twelve-Months) free cash flow ~404B and strong TTM growth). However, cash conversion is not perfect: in TTM (Trailing-Twelve-Months), free cash flow is only ~57% of net income and operating cash flow is slightly below net income, suggesting working-capital or timing headwinds. Still, the business consistently produces meaningful free cash flow across years despite cyclicality.78
Positive
| Breakdown | TTM | Mar 2025 | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 2.40T | 2.43T | 1.83T | 2.21T | 2.00T | 1.40T |
| Gross Profit | 1.09T | 1.15T | 830.27B | 984.41B | 911.82B | 564.95B |
| EBITDA | 722.18B | 759.59B | 508.68B | 660.82B | 636.20B | 354.73B |
| Net Income | 505.27B | 544.13B | 363.96B | 471.58B | 437.08B | 242.94B |
Balance Sheet | ||||||
| Total Assets | 2.64T | 2.63T | 2.46T | 2.31T | 1.89T | 1.43T |
| Cash, Cash Equivalents and Short-Term Investments | 418.76B | 496.24B | 472.55B | 473.10B | 371.27B | 311.55B |
| Total Debt | 87.01B | 0.00 | 13.32B | 13.22B | 4.36B | 3.81B |
| Total Liabilities | 630.19B | 770.77B | 696.28B | 712.07B | 547.41B | 400.80B |
| Stockholders Equity | 2.01T | 1.86T | 1.76T | 1.60T | 1.35T | 1.02T |
Cash Flow | ||||||
| Free Cash Flow | 403.86B | 414.13B | 309.74B | 349.96B | 218.28B | 84.96B |
| Operating Cash Flow | 599.21B | 582.17B | 434.72B | 426.27B | 283.39B | 145.89B |
| Investing Cash Flow | -165.30B | -169.61B | -125.15B | -41.76B | -55.63B | -18.27B |
| Financing Cash Flow | -302.78B | -388.84B | -325.01B | -256.53B | -167.26B | -114.53B |
Tokyo Electron Technical Analysis
Positive
130.24
Price Trends
127.20
Positive
115.12
Positive
98.89
Positive
Market Momentum
4.19
Positive
52.99
Neutral
37.36
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TOELY, the sentiment is Positive. The current price of 130.24 is below the 20-day moving average (MA) of 137.06, above the 50-day MA of 127.20, and above the 200-day MA of 98.89, indicating a bullish trend. The MACD of 4.19 indicates Positive momentum. The RSI at 52.99 is Neutral, neither overbought nor oversold. The STOCH value of 37.36 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TOELY.
Tokyo Electron Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $288.47B | 47.94 | 65.56% | 0.56% | 25.66% | 46.68% | |
79 Outperform | $126.80B | 38.42 | 29.80% | 1.78% | 17.58% | 16.78% | |
78 Outperform | $540.53B | 51.96 | 51.52% | 0.63% | 24.91% | 39.95% | |
77 Outperform | $464.46B | 39.20 | 22.55% | 0.20% | 45.43% | 203.31% | |
76 Outperform | $295.37B | 38.13 | 38.86% | 0.69% | 4.47% | 0.48% | |
71 Outperform | $323.83B | 75.10 | 7.08% | ― | 31.83% | 80.45% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% |
* Technology Sector Average
TOELY
Tokyo Electron
137.99
62.31
82.33%
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.