Value
4.2/10data confidence 83%| Component | Sub-score |
|---|---|
| P/S | 8.7 |
| EV/EBITDA | 0.0 |
| Fwd P/E | 4.3 |
| PEG | 5.2 |
| Analyst target | 3.0 |
- ▸Forward P/E: 28.4x
- ▸PEG: 1.46
UCTT · Why this verdict
Why Ultra Clean Holdings (UCTT) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score4.0/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
Ultra Clean Holdings supplies semiconductor equipment components with strong price momentum above its 200-day moving average, but a quality score of 2.4 out of 10, negative free cash flow, and nearly 76% of revenue tied to two customers create material concentration and business quality risks.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Applied Materials and Lam Research together account for 58.7% of Ultra Clean's revenue, creating extreme customer concentration risk where the loss or significant reduction of either relationship would impair more than half the company's top line. Bear case | The top-2 customer revenue concentration falls below 50% within 24 months as the company diversifies its customer base into additional equipment makers. | →Stable |
| CounterDeep integration with the world's largest semiconductor equipment companies creates switching costs in the other direction as well — Ultra Clean's proprietary process expertise makes it difficult for Applied Materials or Lam Research to qualify alternative suppliers quickly. | ||
Free cash flow is negative at -2% of revenue and the quality score of 2.4 out of 10 falls below the 4.0 minimum floor, indicating the business is not generating cash and lacks the financial quality to meet baseline investment criteria. Warnings | Free cash flow turns positive and exceeds 3% of revenue within 12 months as the semiconductor equipment cycle recovers and operating leverage flows through. | →Stable |
| CounterWith a forward price-to-earnings of 28.8x and overbought RSI of 70, the market may already be pricing in a recovery of free cash flow generation as semiconductor capex spending accelerates. | ||
International revenues represent 75.9% of Ultra Clean's total sales, creating significant foreign exchange and geopolitical risk, particularly given the semiconductor industry's exposure to export restrictions and trade policy changes between the US and China. Bear case | International revenue share stabilizes below 80% and the company demonstrates geographic revenue resilience through at least 2 quarters of consistent growth. | →Stable |
| CounterHigh international revenue in semiconductor equipment is typical for suppliers to global chipmakers, and diversification across Asia-Pacific end markets may reduce single-country exposure despite the high aggregate international percentage. | ||
The stock trades above all moving averages with momentum scoring 7.7 out of 10 and rising on-balance volume, but the RSI at 70 is at overbought levels following a 6.3% gap up that may trigger a near-term mean-reversion pullback. Momentum breakdown | The RSI consolidates between 50 and 65 without breaking below 40 over the next 3 months, confirming that the overbought condition is resolved through time rather than price correction. | →Stable |
| CounterRising on-balance volume alongside the 200-day moving average breakout suggests the gap up was accompanied by genuine institutional buying rather than speculative retail demand, which is a more durable form of price support. | ||
Applied Materials and Lam Research together account for 58.7% of Ultra Clean's revenue, creating extreme customer concentration risk where the loss or significant reduction of either relationship would impair more than half the company's top line.
→StableBear case
- Expectation
- The top-2 customer revenue concentration falls below 50% within 24 months as the company diversifies its customer base into additional equipment makers.
CounterDeep integration with the world's largest semiconductor equipment companies creates switching costs in the other direction as well — Ultra Clean's proprietary process expertise makes it difficult for Applied Materials or Lam Research to qualify alternative suppliers quickly.
Free cash flow is negative at -2% of revenue and the quality score of 2.4 out of 10 falls below the 4.0 minimum floor, indicating the business is not generating cash and lacks the financial quality to meet baseline investment criteria.
→StableWarnings
- Expectation
- Free cash flow turns positive and exceeds 3% of revenue within 12 months as the semiconductor equipment cycle recovers and operating leverage flows through.
CounterWith a forward price-to-earnings of 28.8x and overbought RSI of 70, the market may already be pricing in a recovery of free cash flow generation as semiconductor capex spending accelerates.
International revenues represent 75.9% of Ultra Clean's total sales, creating significant foreign exchange and geopolitical risk, particularly given the semiconductor industry's exposure to export restrictions and trade policy changes between the US and China.
→StableBear case
- Expectation
- International revenue share stabilizes below 80% and the company demonstrates geographic revenue resilience through at least 2 quarters of consistent growth.
CounterHigh international revenue in semiconductor equipment is typical for suppliers to global chipmakers, and diversification across Asia-Pacific end markets may reduce single-country exposure despite the high aggregate international percentage.
The stock trades above all moving averages with momentum scoring 7.7 out of 10 and rising on-balance volume, but the RSI at 70 is at overbought levels following a 6.3% gap up that may trigger a near-term mean-reversion pullback.
→StableMomentum breakdown
- Expectation
- The RSI consolidates between 50 and 65 without breaking below 40 over the next 3 months, confirming that the overbought condition is resolved through time rather than price correction.
CounterRising on-balance volume alongside the 200-day moving average breakout suggests the gap up was accompanied by genuine institutional buying rather than speculative retail demand, which is a more durable form of price support.
Per-dimension breakdown
Quality
2.4/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 0.0 |
| ROA | 0.9 |
| Gross margin | 0.0 |
| Op margin | 0.9 |
| Net margin | 0.0 |
| Current ratio | 9.9 |
| FCF quality | 0.0 |
| Moat | 3.1 |
| Piotroski F | 6.7 |
- ▸Cash-burning: FCF -2% of revenue
- ▸No competitive moat
- ▸Quality concerns
Growth
3.2/10data confidence 33%| Component | Sub-score |
|---|---|
| Rev growth | 3.2 |
Momentum
5.8/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.0 |
| MACD | 10.0 |
| OBV | 1.0 |
| MA position | 9.0 |
| Volume | 3.8 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
6.3/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 6.5 |
| Analyst rating | 7.3 |
| Price target | 4.9 |
- ▸Light analyst coverage (5.0) — signal dampened
Insider
3.4/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 3.0 |
| insider conviction | 2.0 |
| holder change | 5.1 |
- ▸Notable insider selling — $10,833,388 (0.216% of mkt cap)
Peer rank
3.0/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 8.8 |
| quality rank | 1.0 |
| growth rank | 2.0 |
Technical
4.8/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 3.3 |
| support resistance | 3.7 |
| 52w position | 7.3 |
| gap | 5.0 |
Risk (lower is worse)
3.5/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 5.4 |
| days to cover | 8.1 |
| volatility | 0.0 |
| put call | 3.1 |
| implied vol | 0.0 |
| max pain risk | 3.0 |
| beta | 3.5 |
| debt equity | 4.8 |
- ▸Elevated put/call: 1.53
- ▸High IV: 96%
- ▸Above max pain $40
- ▸Concentration risks: 2 HIGH (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 5.6 |
| earnings timing | 5.0 |
| surprise avg | 9.9 |
| news activity | 5.0 |
How the verdict was assembled
Engine trigger
Quality below minimum threshold.
Engine technical detail
verdict_path:
L1:HARD_BLOCKPassed (7)
- MOMENTUM:5.8>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:33d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.9=NEGATIVE
Warning (0)
none
Reward-to-Risk
-0.92
Upside
-13.8%
Downside
15.0%
Sizing output
AVOID
SetupBREAKOUT — Golden cross, above all MAs, RSI 60, MACD bullish
EdgeNO_EDGE — No clear edge identified
SuitabilityAGGRESSIVE — Beta 1.95>1.3
Investment implication
The L1 gate blocked the positive-verdict path: a hard-floor threshold was breached, so dimensional pillars — including Sentiment at 6.3 could not lift the engine output above the verdict floor. Failed gate signal: ASYMMETRY:-0.9=NEGATIVE.
The strongest dimensions are Sentiment at 6.3, Catalyst at 6.1, and Momentum at 5.8; the weakest are Quality at 2.4, Peer rank at 3.0, and Growth at 3.2. The V9 engine flagged 1 failed gate, producing an asymmetric reward-to-risk of -0.92 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Applied Materials and Lam Research together account for 58.7% of Ultra Clean's revenue, creating extreme customer concentration risk where the loss or significant reduction of either relationship would impair more than half the company's top line.
Trip ifRevenue from the top 2 customers rises above 65%, more than 6 percentage points above the current 58.7% concentration level, indicating the diversification thesis is moving in the wrong direction.
- P2Free cash flow is negative at -2% of revenue and the quality score of 2.4 out of 10 falls below the 4.0 minimum floor, indicating the business is not generating cash and lacks the financial quality to meet baseline investment criteria.
Trip ifFree cash flow remains below -5% of revenue for 2 consecutive quarters, indicating the business is burning cash faster than the semiconductor recovery thesis assumes.
- P3The stock trades above all moving averages with momentum scoring 7.7 out of 10 and rising on-balance volume, but the RSI at 70 is at overbought levels following a 6.3% gap up that may trigger a near-term mean-reversion pullback.
Trip ifRSI falls below 40 within 60 days of the current overbought reading, confirming the gap up is reversing in a sharp mean-reversion move rather than consolidating.
- P4International revenues represent 75.9% of Ultra Clean's total sales, creating significant foreign exchange and geopolitical risk, particularly given the semiconductor industry's exposure to export restrictions and trade policy changes between the US and China.
Trip ifInternational revenue growth falls below -5% year over year for 2 consecutive quarters, indicating geographic concentration is becoming a drag rather than a tailwind.