Best Semiconductor Stock to Buy Now: ASML vs. NVTS vs. SIMO

Although economic headwinds may be on the horizon, the best semiconductor stocks to buy may still command extraordinary relevance. Fundamentally, society continues to move forward in the search for innovation, irrespective of financial difficulties. Considering that so many of the conveniences we take for granted rely on computer chips, this segment may still offer significant upside opportunities.

Nevertheless, it’s difficult to know which semiconductor stocks to buy. Here, we’re going to take a look at three intriguing enterprises, ranked according to their upside potential as determined by Wall Street analysts. Generally, investors should be aware of the adage that the higher the reward, the greater the risk. Still, if you’re intent on targeting the tech space, these three chip stocks might be a solid place to start your research.

Semiconductor Stocks to Buy: ASML Holding (ASML)

Easily ranking as one of the best semiconductor stocks to buy for pertinence to the wider technology industry, ASML Holding (NASDAQ:ASML) specializes in the manufacturing of lithography machines. Basically, lithography is the most expensive step in making advanced microchips, which involves printing designs on silicon wafers. What’s more, ASML is the only company in the world that manufactures lithography machinery.

Since the start of this year, ASML shot up over 19%, delivering one of the better performances among chip stocks. Financially, the underlying company offers a well-balanced profile. For one thing, its Altman Z-Score pings at 7.12, indicating high fiscal stability and low bankruptcy risk.

Operationally, ASML’s three-year revenue growth rate comes in at 23.8%, ranked above 76.36% of companies in the semiconductor industry. In terms of profitability, ASML’s trailing-year net margin is 28.23%, above 92.41% of its rivals. Finally, Wall Street analysts peg ASML as a consensus moderate buy. On average, their price target lands at $788.50, implying over 20% upside potential.

Navitas Semiconductor (NVTS)

Headquartered in Torrance, California, Navitas Semiconductor (NASDAQ:NVTS) represents one of the smaller-capitalization ideas among the best chip stocks for upside potential. According to its website, Navitas specializes in next-generation power semiconductor solutions. In particular, the company may provide incredible relevancies regarding fast-charging networks for electric vehicles. As well, the tech firm offers applications in other arenas, such as mobile, data centers, and solar energy equipment.

While Navitas might not be a household name, for those that appreciate the best semiconductor stocks to buy, NVTS commands attention. Since the start of the year, shares gained nearly 84%, a remarkable performance. However, newfound technical momentum suggests NVTS could move even higher. Financially, Navitas leverages a stable balance sheet; most prominently its cash-to-debt ratio of 16.8 (above 75.24% of the competition). However, because of its small sales profile, NVTS is more of an aspirational enterprise.

Still, analysts peg NVTS as a unanimous strong buy. Their average price target clocks in at $9, implying almost 36% upside potential.

Silicon Motion Technology (SIMO)

An American-Taiwanese company that develops NAND flash controller-integrated circuits for solid-state storage devices, Silicon Motion Technology (NASDAQ:SIMO) supplies more NAND flash controllers than any other company, per its public profile. One of the best semiconductor stocks to buy for both relevance and massive upside potential, SIMO isn’t for the faint of heart.

While it might rank among the best chip stocks, SIMO shares tumbled more than 16% since the January opener. In the trailing one-year period, they gave up almost 42% of market value. So, those that can’t stand the sight of red in their portfolios should turn away.

Still, you can’t ignore the underlying financial strengths. For instance, Silicon Motion suffers no debt, affording it flexibility during this difficult hour. Operationally, the company’s three-year revenue growth rate comes in at 29.8%, ranked above 84.54% of the competition. Also, it trades at a trailing multiple of 7.82, which is undervalued. In closing, analysts peg SIMO as a consensus moderate buy. Their average price target stands at $86.50, implying nearly 61% upside potential.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.