Back to top

Image: Bigstock

Silicon Motion (SIMO) Hits Fresh High: Is There Still Room to Run?

Read MoreHide Full Article

Shares of Silicon Motion Technology (SIMO - Free Report) have been strong performers lately, with the stock up 26.3% over the past month. The stock hit a new 52-week high of $88.05 in the previous session. Silicon Motion Technology has gained 82.7% since the start of the year compared to the 26.5% move for the Zacks Computer and Technology sector and the 40.2% return for the Zacks Electronics - Semiconductors industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 27, 2021, Silicon Motion reported EPS of $1.7 versus consensus estimate of $1.62 while it beat the consensus revenue estimate by 3.48%.

For the current fiscal year, Silicon Motion is expected to post earnings of $6.05 per share on $958.17 million in revenues. This represents an 86.73% change in EPS on a 77.6% change in revenues. For the next fiscal year, the company is expected to earn $7.09 per share on $1.11 billion in revenues. This represents a year-over-year change of 17.15% and 15.44%, respectively.

Valuation Metrics

Silicon Motion may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

Silicon Motion has a Value Score of B. The stock's Growth and Momentum Scores are A and F, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 14.5X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 34.4X versus its peer group's average of 21.7X. Additionally, the stock has a PEG ratio of 1.82. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Silicon Motion currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Silicon Motion passes the test. Thus, it seems as though Silicon Motion shares could have potential in the weeks and months to come.

How Does Silicon Motion Stack Up to the Competition?

Shares of Silicon Motion have been moving higher, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also impressive, including SMART Global Holdings (SGH - Free Report) , Lattice Semiconductor (LSCC - Free Report) , and Broadcom (AVGO - Free Report) , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

The Zacks Industry Rank is in the top 19% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Silicon Motion, even beyond its own solid fundamental situation.

Published in