Semiconductors are the silicon backbone of the digital revolution. Still, they’re subject to swings in the broader economy because customers often stockpile chips ahead of demand. Some investors seem to be debating where we are in the cycle as the industry’s six-month return of 5.8% has fallen short of the S&P 500’s 16.1% rise.

Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. With that said, here is one semiconductor stock poised to generate sustainable market-beating returns and two that may face trouble.

Two Semiconductors Stocks to Sell:

Sensata Technologies (ST)

Market Cap: $3.81 billion

Originally a temperature sensor control maker and a subsidiary of Texas Instruments for 60 years, Sensata Technology Holdings (NYSE: ST) is a leading supplier of analog sensors used in industrial and transportation applications, best known for its dominant position in the tire pressure monitoring systems in cars.

Why Should You Dump ST?

1. Muted 3.1% annual revenue growth over the last five years shows its demand lagged behind its semiconductor peers
2. Estimated sales decline of 9.1% for the next 12 months implies an even more challenging demand environment
3. Expenses have increased as a percentage of revenue over the last five years and its operating margin fell by 13.3 percentage points

At $25.80 per share, Sensata Technologies trades at 6.9x forward price-to-earnings. Check out our free in-depth research report to learn more about why ST doesn’t pass our bar.

Vishay Intertechnology (VSH)

Market Cap: $2.39 billion

Named after the founder's ancestral village in present-day Lithuania, Vishay Intertechnology (NYSE:VSH) manufactures simple chips and electronic components that are building blocks of virtually all types of electronic devices.

Why Do We Pass on VSH?

1. Annual revenue growth of 1.9% over the last five years was below our standards for the semiconductor sector
2. High input costs result in an inferior gross margin of 25.3% that must be offset through higher volumes
3. Free cash flow margin shrank by 12.5 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

Vishay Intertechnology is trading at $17.37 per share, or 22.2x forward price-to-earnings. If you’re considering VSH for your portfolio, see our FREE research report to learn more.

One Semiconductors Stock to Watch:

MACOM (MTSI)

Market Cap: $9.63 billion

Founded in the 1950s as Microwave Associates, a communications supplier to the US Army Signal Corp, today MACOM Technology Solutions (NASDAQ: MTSI) is a provider of analog chips used in optical, wireless, and satellite networks.

Why Are We Positive On MTSI?

1. Offerings and unique value proposition resonate with customers, as seen in its above-market 6.6% annual sales growth over the last two years
2. Market share is on track rise over the next 12 months as its 21.4% projected revenue growth implies demand accelerate from its two-year trend
3. Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 49.2% annually

MACOM’s stock price of $127.08 implies a valuation ratio of 35.5x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.

Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.