Small-Cap Semi a Big HITT

Hittite Microwave (HITT - Snapshot Report) is a leader in integrated circuits, modules and subsystems for wireless communications. The company has a broad product portfolio across a large portion of the frequency spectrum, including radio frequency (RF), microwave and millimeterwave. Hittite is poised to grow from its international business, focus on new products and deeper penetration into existing customers.

The company reported a strong Q1 and we still expect double-digit revenue growth for the full year. We therefore maintain our Buy rating on HITT shares with a $55.00 price target.

Hittite generated an impressive return on equity (ROE) of 28% for the full year 2007. ROE has declined due to the increased level of equity from its IPO and is forecasted to decline further due to its strong cash generation. This in turn reduces its activity and solvency ratios. The more important component of ROE, net margin, has improved steadily over the past year, which we expect it to maintain at approximately 30%, a very healthy rate.

Hittite is currently trading at 24.06x our estimated 2008 EPS of $1.75. Although a premium to its peers on an absolute P/E multiple, its stronger growth rate makes the stock look more attractive with a PEG ratio of 1.0.

Read the full analyst report on HITT.

Read the full analyst report on HITT