Financial analysis of Photronics

1. Executive Summary

• Current Financial Position: PHOTRONICS INC (PLAB) reported revenue of $210,984,000 and net income of $34,388,000 for the quarter ending August 3, 2025.
• Key Findings:
  • Revenue remained relatively stable compared to the same quarter last year ($210,984,000 in Q3 2025 vs. $210,984,000 in Q3 2024).
  • Net income decreased by 33.5% compared to the same quarter last year ($34,388,000 in Q3 2025 vs. $22,891,000 in Q3 2024, using the most recent and prior year data for comparison).
  • The company maintains a strong cash position with $479,521,000 in cash and cash equivalents as of August 3, 2025.
• Overall Financial Trend: The financial trend is mixed, showing stability in revenue but a decline in net income.

2. Profitability Analysis

• Revenue and Profit Trends:
  • Revenue: $210,984,000 (Q3 2025) vs. $210,984,000 (Q3 2024), showing stability.
  • Net Income: $34,388,000 (Q3 2024) vs. $22,891,000 (Q3 2025), representing a 33.5% decrease.
• Profit Margins:
  • Gross Profit Margin: 35.6% (Q3 2025) vs. 35.6% (Q3 2024), remaining stable.
  • Operating Income Margin: 22.8% (Q3 2025) vs. 24.7% (Q3 2024), showing a slight decrease.
• Operating Efficiency and Cost Structure:
  • Cost of Goods Sold (COGS) increased slightly as a percentage of revenue, from 64.4% to 66.1%, indicating a minor decrease in operational efficiency.
  • Selling, General, and Administrative (SG&A) expenses decreased from $19,436,000 to $18,423,000, showing some cost control.

3. Balance Sheet Strength

• Assets, Liabilities, and Equity:
  • Total Assets: $1,752,765,000 (Q3 2025) vs. $1,712,059,000 (Q4 2024), showing a 2.4% increase.
  • Total Liabilities: $214,765,000 (Q3 2025) vs. $231,300,000 (Q4 2024), indicating a decrease in liabilities.
  • Stockholders' Equity: $1,538,000,000 (Q3 2025) vs. $1,480,759,000 (Q4 2024), showing a 3.9% increase.
• Liquidity and Solvency:
  • Cash and Cash Equivalents: $479,521,000 (Q3 2025) vs. $598,485,000 (Q4 2024), showing a decrease.
  • Current Ratio: 5.0 (Q3 2025) vs. 5.1 (Q4 2024), indicating strong liquidity.

4. Cash Flow Assessment

• Cash Flows:
  • Operating Cash Flow: $159,974,000 (Q3 2025) vs. $193,074,000 (Q3 2024), showing a decrease.
  • Investing Cash Flow: -$173,599,000 (Q3 2025) vs. -$142,058,000 (Q3 2024), indicating increased investment activities.
  • Financing Cash Flow: -$115,284,000 (Q3 2025) vs. -$6,428,000 (Q3 2024), primarily due to share repurchases.
• Cash Generation and Sustainability:
  • The company generated significant cash from operations but saw a decrease compared to the previous year.
  • Cash and cash equivalents decreased, but the company still maintains a strong cash position.

5. Growth and Investment

• Capital Expenditures and R&D:
  • Capital Expenditures: $120,588,000 (Q3 2025) vs. $87,733,000 (Q3 2024), showing an increase in investment.
  • R&D Expenses: $4,271,000 (Q3 2025) vs. $3,555,000 (Q3 2024), indicating increased investment in research and development.
• Growth Trajectory:
  • Revenue stability indicates a steady growth trajectory.
  • Increased investment in capital expenditures and R&D suggests potential for future growth.

6. Risk Factors

• Financial Risks:
  • Decrease in net income and operating cash flow.
  • Increased capital expenditures and negative investing cash flow.
  • Share repurchases impacting financing cash flow.
• Concerning Trends:
  • Decline in net income despite stable revenue.
  • Decrease in cash and cash equivalents.

7. Valuation Context

• Valuation Metrics:
  • P/E Ratio: Using the diluted EPS of $0.39 for Q3 2025 and a stock price of $19.06, the P/E ratio is approximately 48.9.
  • P/S Ratio: With revenue per share (using diluted shares) of approximately $3.63 and a stock price of $19.06, the P/S ratio is about 5.25.
• Historical Comparison:
  • The current P/E is higher than historical averages, indicating potentially higher expectations for future growth.
  • The P/S ratio is relatively stable compared to historical trends.

8. Key Considerations

• Key Factors for Investors:
  • Stability in revenue with a decline in net income, indicating potential operational challenges.
  • Strong cash position and liquidity, providing financial flexibility.
  • Increased investment in capital expenditures and R&D, suggesting potential for future growth.
• Potential Strengths and Challenges:
  • Strengths: Strong cash position, stable revenue.
  • Challenges: Declining net income, significant share repurchases.
• Trends and Anomalies:
  • Decrease in net income despite stable revenue.
  • Significant cash outflows for share repurchases and capital expenditures.