Neil Macneale, is well known for compiling an ongoing model portfolio based on companies that have a...
Internet of Things Lifts Skyworks
02/24/2015 7:00 am EST
This recommendation, a producer of a variety of electronics and semiconductors, is finding huge demand for its products with the build-out of the Internet of Things, explains Chuck Carlson, editor DRIP Investor.
The emergence of everything connecting to the Internet-autos, clothes, homes, etc.-is a huge plus for Skyworks Solutions (SWKS), as its products facilitate this connectivity.
Skyworks is also getting a big lift from demand for Apple's new iPhone products, which feature Skyworks technology.
Of course, the big gain in the stock-the shares are up 165% since we featured it a year ago-begs the question, "Is it time to take profits?" I believe the answer is no.
Skyworks' December quarter results were quite impressive. Revenue was up 59% year over year. Earnings were up 88%. Profit margins continued to expand and the firm had $1 billion in cash assets (around $5.40 per share) and no debt at the end of the quarter.
For the March quarter, the firm anticipates revenue of $750 million, up 56. The firm expects per-share profit of $1.12 versus $0.62 a year ago.
The bottom line is that the company continues to put up very impressive growth numbers and visibility for growth over the next several years is high. The current quarterly dividend of $0.13 per share should get a hefty boost in 2015.
Despite the big gains in 2014, these shares are not richly valued. The stock trades at 17 times the fiscal 2015 earnings estimate of $4.88 per share and that estimate will almost certainly prove conservative.
And, when you wash out the $5.40 per share in cash on the books, the forward price-earnings multiple drops to less than 16. I remain a big fan of these shares even after the rise in the stock price and would be a buyer of the stock.
DRIP investors should note that Skyworks Solutions offers a direct-purchase plan whereby any investor may buy the first share and every share of stock directly from the company.
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