AG Associates : No. 1 on Return on Equity 100

AG Associates had a good 1995--and 1994.

The San Jose company, which makes rapid thermal processing equipment used in manufacturing integrated circuits, tops our Return on Equity 100 list, which ranks companies by average return on equity, a common measure of profitability.

AG’s two-year return of 176% means that it earned $1.76 in profit for every dollar invested by shareholders.

The company’s recent success has been driven by worldwide demand for tiny integrated circuits used in computers and telecommunication devices.

But there may be trouble ahead.

The computer chip industry is in a slump. Moreover, AG stock plummeted 31% last January when the company lost a bid for orders from Intel for a device used in making semiconductor chips. Shares have traded just under $9 recently.

The company reported record sales of $23.2 million for its fiscal second quarter ended March 31, but it warned that slack demand and increased competition will bring earnings to the “break-even level” later this year.