Fairchild Semiconductor

If you are looking for a good stock to buy on the dip, this Zacks #1 Rank (Strong Buy) could be an excellent choice.

Company Description

Fairchild Semiconductor makes power analog, discrete and some non-power semiconductor solutions. These products have consumer, communications, automotive and other applications.

Record Cash Flow

On Jan 20 Fairchild Semiconductor announced its year-end results that showed $175 million in free cash flow, which is a record for the company. FCS managed to cut its debt by more than half, to $152 million, a low point for the company.

Fourth-quarter results were encouraging. Sales were up 12% since this point last year, to $398 million. Earnings for the period came in at $51 million, or $0.40 per share. This is up from $36 million a year ago and the EPS figure was 6 cents better than expected.

2011 Outlook

Fairchild Semiconductor forecasted sales between $405 and $420 million in 2011, which was enough for analysts to raise their earnings targets.

The Zacks Consensus Estimate for 2011 is up 21 cents, to $1.58 in the past 3 months. Next year's forecasts rose 12 cents on average, to $1.78.

In 2010 Fairchild Semiconductor earned $1.51, putting expected growth rates at 4% and 13%, respectively. However, the company has typically seen analysts raise those estimates throughout the year.

Sector Upgrade

Recently an analyst at Baird released an upgrade for several chip companies. That analyst sited better pricing capabilities and a solid rebound. There have been plenty of people calling for a pull back in this area, but the inventories are still low, which bodes well for FCS and its peers in the near future.

The Chart

If you are a fan of buying on a dip, this is a great chance to get into FCS. The stochastic is pointing to an oversold stock and the fundamentals are looking great.

Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service

Read the full analyst report on FCS