5N Plus (TSX: VNP) develops, manufactures, and markets specialty semiconductors and performance materials that are critical to several high-growth industries. Supported by its exposure to the fast-expanding semiconductor sector and strong quarterly performance, the company has delivered an impressive return of more than 150% this year, significantly outperforming the broader equity markets.
Building on this momentum, let’s take a closer look at 5N Plus’s recently reported third-quarter results, growth outlook, and valuation to assess whether the stock still offers an attractive buying opportunity at current levels.
5N Plus’s third-quarter performance
Last month, 5N Plus delivered an impressive third-quarter performance, reporting its strongest quarterly revenue in a decade along with record adjusted gross margin and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization). Revenue for the quarter reached $104.9 million, representing a 33.1% year-over-year increase. Strong sales in the terrestrial renewable energy and space solar power markets within the Specialty Semiconductors segment, as well as favourable pricing for its bismuth-based products in the Performance Materials segment, supported its topline growth.
Profitability also improved meaningfully. Adjusted gross profit rose 58% to $38.7 million, while adjusted gross margin expanded to 36.9% from 31.1% in the prior-year quarter. Supported by revenue growth and margin expansion, adjusted EBITDA climbed 86% year over year to $29.1 million. Net income surged 184.4% to $18.2 million during the quarter, reflecting substantial operating leverage.
In addition, the company strengthened its balance sheet by reducing net debt from $100.1 million at the beginning of the year to $63.3 million, with its net-debt-to-EBITDA ratio improving to a healthy 0.74. With a backlog of $357.5 million, 5N Plus ended the quarter with 311 days of annualized revenue, up 14 days sequentially.
Next, let’s examine the company’s growth prospects.
5N Plus’s growth prospects
Management expects demand for 5N Plus’s specialty semiconductors from the terrestrial renewable energy and space solar power markets to remain strong in the fourth quarter, as customers continue to source advanced materials from trusted and reliable partners. However, based on historical trends, the management expects its Performance Materials segment to experience a seasonal slowdown compared with the first half of the year. Despite this, management anticipates further margin expansion, supported by the company’s strategic global footprint and efficient sourcing capabilities.
Backed by these favourable dynamics and healthy performance in the first three quarters, management has raised its 2025 adjusted EBITDA guidance to $85–$90 million from its earlier range of $65–$70 million.
In addition, 5N Plus signed a new and expanded supply agreement with First Solar in August. Under this new agreement, the company’s production and supply of cadmium telluride could increase by 33% during the 2025–2026 period, followed by an additional 25% increase in the subsequent 2027–2028 term. The company is also set to begin producing and delivering cadmium selenide – used in the manufacturing of photovoltaic solar panels – to First Solar starting next year.
Combined with its high-quality products and resilient supply chain, 5N Plus is well-equipped to expand its market share. Considering all these factors, the company’s long-term growth prospects appear healthy and well-supported.
Investor takeaway
The past three years have been exceptional for 5N Plus, with the stock delivering a total return of approximately 610%, translating into an impressive annualized gain of 92.2%. Despite this strong performance, the company’s valuation remains attractive, with next-12-month (NTM) price-to-sales and price-to-earnings multiples of 2.8 and 22.3, respectively. Given its healthy growth outlook and reasonable valuation, I believe 5N Plus represents an excellent buying opportunity.
