Diodes (DIOD) dates back to 1959, growing from a regional semiconductor-trading company to an integrated global manufacturer serving the electronics, industrial, and communications markets, suggests Richard Moroney in his small cap oriented advisory service, Upside.

The company operates 21 global locations, selling more than 25,000 products to an expansive customer base. Despite operating in a highly cyclical industry, Diodes has delivered 26 consecutive years of profitability. Sales, which topped $1 billion in 2017, have grown 10% annually over the last 10 years.

The company said per-share earnings soared 51% to $0.68 in the September quarter, surpassing the consensus by $0.05. Revenue rose 13% to $321 million and was in line with expectations. Gross profit margin increased more than two percentage points to 35.9%.

In regard to tariffs, Diodes says all the products it imports to the U.S. from China “are going to be ultimately affected.” Management anticipates a $1.1 million quarterly cost from the first round of tariffs, and an additional $2.5 million from tariffs yet to go into effect. “But we plan to pass these tariff charges on to our customers.”

The stock's trailing P/E ratio of 15 stands near its lowest level since 2011 and well below its industry average of 20. Meanwhile, companies lowering their debt levels are improving their balance sheets, which could in turn reduce future borrowing costs.

More important, debt repayment implies operations are generating excess cash, which down the road may be distributed to shareholders. Diodes has cut total debt by at least 12% over the past 12 months. The stock, earning a Value score of 81, is rated a "Best Buy".

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