MagnaChip Semiconductor

MagnaChip Semiconductor Corp. (MX - Snapshot Report) topped earnings estimates by an impressive 120% in its third quarter, which was also the sixth straight quarter with a positive surprise. Following the report, this provider of analog and mixed-signal semiconductor products enjoyed raised earnings estimate revisions that helped it become a Zacks #1 Rank (Strong Buy). Moreover, MagnaChip has a forward price-to-earnings (P/E) multiple of just 6.2, which makes it attractive for value investors.

MagnaChip Crushes Q3 EPS Estimate

On November 1, MagnaChip reported third quarter earnings of $1.39, soaring past the Zacks Consensus Estimate of 76 cents. Revenue growth of 10.7% was impressive and in line with the Zacks Consensus Estimate of $222.0 million.

The year-over-year upside in revenue was primarily driven by strong performances from Manufacturing Services (up 45% year over year) and Power Solutions (up 28.4%), which fully offset a weak result from Display Solutions (down 24.4%).

Gross margin expanded 450 basis points year-over-year to 34.5%, reflecting a favorable business mix and productivity improvements.

For the fourth quarter, revenue is expected to between $213.0 million and $222.0 million with gross margin of 33.5%– 34.5%.

Earnings Estimates Moving Up

The Zacks Consensus Estimate for 2012 has jumped 20.6% to $2.17 per share over the last 60 days, representing year-over-year growth of 33.6%. The Zacks Consensus Estimate for 2013 advanced 18.9% to $2.33 in the same time, reflecting a year-over-year increase of 7.4%.

Impressive Valuation

In addition to a low P/E, the stock looks attractive with respect to a price-sales (P/S) multiple of just 0.6. A P/E below 15.0 and a P/S ratio less than 1.0 generally suggest a value stock.

Moreover, MagnaChip’s Return on Equity (ROE) of 48.2%, Return on Investment (ROI) of 22.6% and Return on Asset (ROA) of 13.3% are all better than the industry averages.

Seoul, South Korea-based MagnaChip Semiconductor Corp. designs and manufactures analog and mixed-signal semiconductor products. Its customers include consumer electronics original equipment manufacturers (OEMs) such as LG Display, subsystem designers, contract manufacturers, and analog and mixed-signal semiconductor companies. The company primarily sells its products through a direct sales force and a network of agents and distributors all over Korea, Japan, Greater China and Europe. The company has a market cap of $499.84 million and faces significant competition from Analog Devices (ADI).

Want More of Our Best Recommendations?

Zacks' Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Then each week he hand-selects the most compelling trades and serves them up to you in a new program called Zacks Confidential.

Learn More>>