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CEVA, Inc., engages in designing and licensing silicon intellectual property for the handsets, portable multimedia, and consumer electronics markets primarily in Europe, the Middle East, and the Asia Pacific.
Earnings Surprises Help
CEVA has had a positive earnings surprise in each of the last six reporting quarters. The impressive has been the percent of the surprises. While the smallest beat was only $0.01, the percentage surprise was 8.3% and the stock moved 10%. On average the surprise percentage has been 22%, suggesting the company will likely continue to post these positive surprises.
The top line is a slightly different story, as the Zacks Consensus Estimate has been met in three of the last six quarters and minimal the beats have been nominal. This suggests that the analysts have a good handle of the revenue prospects of the company
What we would like to see is more revenue growth. CEVA has reported revenue of between $13 million and $15 million in each of the last four quarters. Revenue for the December 2011 quarter is estimated at $15 million.
Company shows well at CES
A recent report by a covering research analyst noted that they saw several demos of cell phones that had rich features including high definition audio and HD video, rich digital imaging and 3D graphics-rich gaming. These features are the mainstay's of CEVA's core.
CEVA trades at a premium to the industry on most standard metrics. The largest premium, as alluded to above, is the price to sales metric of 11.3x versus a 1.7x industry average. Trading at 31x forward earnings compared to 13.5x for the industry also shows how CEVA trades at a rich multiple.
Despite the lofty valuation, when looking at the Price and Consensus chart, we see that CEVA has seen consistent earnings growth. There is correlation to expected outperformance when we see the earnings lines (multi colored) ahead of the stock price. This is the case CEVA and the stock is a Zacks #1 Rank (Strong Buy).
Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service
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