Varex Imaging (NAS:VREX) — mrkt cap $585mm; Price $14.31; EV/EBITDA 14
PASS. Varex is a leading manufacturer of X-ray imaging components for the medical industry, producing essential parts such as X-ray tubes and detectors. They partner with OEMs like Canon and GE, and have stable, long-term relationships that have consistently yielded gross margins above 30%. Much of their manufacturing takes place in China, subjecting them to US tariffs, and they have begun shifting operations to Germany and the Philippines. Additionally, about 25% of their revenue comes from China, posing more risks due to geopolitical tensions. We anticipate further challenges and expect better buying opportunities in the future.
10X Genomics (NAS:TXG) — mrkt cap $1.9B; Price $15.68; EV/EBITDA NA
PASS. 10x Genomics remains the clear leader in the single-cell analysis market with its Chromium platform, holding a 75-80% market share. Its droplet-based cell partitioning technology provides high throughput and cost-effective solutions, making it the top choice for researchers. However, the company’s reliance on its single product Chromium is a concern, especially as the product may have reached significant market penetration in key research labs. With slower growth expected in the single-cell space, TXG’s long-term growth prospects are lessened. P/S 4x & burning cash
nLight (NAS:LASR) — mrkt cap $580mm; Price $11.12; EV/EBITDA NA
MORE RESEARCH NEEDED: nLIGHT, Inc. is a leading U.S. provider of high-powered lasers, specializing in industrial applications, microfabrication (precision manufacturing at tiny scales), and, increasingly, defense—which now makes up > 50% of its revenue. As defense industries adopt laser technologies for their cost-effectiveness against emerging threats like drones (much easier and cheaper to zap a drone than waste expensive missiles), nLIGHT stands to benefit. Israel made a big splash in the space after recently announced a $500 million “Iron Beam” laser defense program. nLIGHT’s vertical integration and advanced capabilities provide a competitive edge in defense, where it has secured multiple contracts to develop high-energy systems for U.S. military programs. Although the defense segment may be interesting, the industrial segment (~20% of revenue) faces intense competition from lower-cost Chinese producers. More work is needed to fully understand the dynamics of its other segments and the scaling challenges on the defense side.