SKYT

We rate SkyWater Technology, Inc (SKYT) as a Hold with a composite score of 59.9/100 at a current price of $28.09. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in momentum (90th percentile) and value (64th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (19th percentile) and stability (33th percentile) tempers our overall conviction. We assign a Narrow Moat rating (56/100), High uncertainty, and Exemplary capital allocation.

Key items to watch: sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

SkyWater Technology, Inc holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 59.9/100 places it at rank #697 in our full 7,333-stock universe. At $871M in market capitalization, SkyWater Technology, Inc is a small-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.

The near-term outlook is constructive, with revenue growing at 62% and momentum in the 90th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 19th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 22% (-20.7pp vs sector) narrow to operating margins of -2% (-3.1pp vs sector) and net margins of 18.5%, yielding a gross-to-net conversion rate of 85%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $28.09, SkyWater Technology, Inc is trading near fair value based on current fundamentals. Our value factor score of 64/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 10.3x (a 54% discount to the sector median of 22.3x), EV/EBITDA of 514.5x (at a premium), P/B of 6.8x, P/S of 3.8x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a High uncertainty rating to SkyWater Technology, Inc. Key risk factors include elevated market sensitivity (beta of 2.32), below-average price stability (33th percentile). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 2.32); below-average price stability (33th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 33th percentile and quality factor at the 51th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: conservative leverage (20% D/E) limits balance sheet risk. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate SkyWater Technology, Inc's capital allocation as Exemplary. Management demonstrates a strong track record of balancing reinvestment with shareholder returns, evidenced by returns on equity of 66.4%, disciplined leverage (20% D/E), best-in-class net margins of 18.5%. Exemplary allocators typically generate returns on equity above 20% while maintaining debt-to-equity below 50% — SkyWater Technology, Inc meets this high bar.

The balance sheet remains conservatively managed, providing financial flexibility for opportunistic investments while maintaining a margin of safety for shareholders. We note that the combination of 16.9% return on assets and controlled leverage suggests management is deploying capital at rates well above the cost of capital — the hallmark of exemplary stewardship.

In summary, SkyWater Technology, Inc receives a Hold rating with a composite score of 59.9/100 (rank #697 of 7,333). Our quantitative framework assigns a Narrow Moat (56/100, trend: stable), High uncertainty, and Exemplary capital allocation. The average factor score across quality, value, momentum, stability, and investment is 51/100.

Our analysis supports a neutral stance on SkyWater Technology, Inc. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.