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Why You Should Hold on to Cirrus Logic (CRUS) Stock Now
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A successful portfolio manager understands the importance of adding well-performing stocks at the right time. Indicators of a stock’s bullish run include a rise in its share price and strong fundamentals.
One such stock that investors need to hold on to right now is Cirrus Logic, Inc. (CRUS - Free Report) . Although there are a few concerns, these are short-lived. So, the stock has the potential to perform well in the long run.
The stock returned approximately 71.6% in the last one year, outperforming the Zacks categorized Electronics - Semiconductors industry’s gain of 61.2%.
Let’s look at the reasons behind Cirrus Logic’s solid momentum.
What’s Driving the Stock?
Cirrus Logic is a premier supplier of high performance analog circuits and advanced mixed-signal chip solutions.
The company posted better-than-expected third-quarter fiscal 2017 results. The year-over-year comparisons on both the counts were also favorable. Notably, as per revenue segments, Portable audio product revenues accounted for approximately 92% of the total revenue last quarter. Cirrus Logic generates a significant portion of its revenues from Apple Inc. (AAPL - Free Report) .
The company is on a growth trajectory, gathering momentum from its positive earnings surprise history and strong fundamentals. It posted a positive earnings surprise in the last four quarters, with an average positive surprise of 58.1%.
Given that the company’s long-term earnings per share growth rate is 17.5% and has a Growth Style Score of “A”, we believe that the stock still has much upside potential.
Moreover, combined with other attractive features like high return on equity (ROE) and high return on assets (ROA), the stock looks quite attractive. While its ROE indicates that the company is reinvesting its cash at a high rate of return, ROA is the profit that a company earns for every dollar of its assets. Cirrus Logic currently trades at an ROE of 25.1%, a lot higher than the industry average of 19.1%. Notably, the company has an ROA of 18.3% compared with the industry average of 10.7%.
It needs to be noted that Cirrus Logic currently has a trailing 12 month P/E ratio of 17.61. This level compares favorably to some extent with what the industry saw over the last one year. The ratio is lower than the average level of 20.45 and is towards its lower end of the valuation range over this period. Hence, valuation looks favourable from a P/E perspective.
Furthermore, continued investments in the audio segment are expected to have a positive impact in the long run. Additionally, synergies from acquisitions and expansion in the LED market continue to drive growth.
Risks Remain
We remain cautious about the company as the current global economic downturn might have an impact on its performance in the to-be-reported quarter. Moreover, the company faces competition from the likes of Texas Instruments Inc. (TXN - Free Report) and STMicroelectronics N.V. (STM - Free Report) , which remains a headwind.
Bottom Line
Considering these positives, we believe Cirrus Logic is one such technology stock that deserves a place in investors’ portfolio. We can essentially filter the negatives and focus on the positives which drive price.
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public. Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Click here for Zacks' private trades >>
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Why You Should Hold on to Cirrus Logic (CRUS) Stock Now
A successful portfolio manager understands the importance of adding well-performing stocks at the right time. Indicators of a stock’s bullish run include a rise in its share price and strong fundamentals.
One such stock that investors need to hold on to right now is Cirrus Logic, Inc. (CRUS - Free Report) . Although there are a few concerns, these are short-lived. So, the stock has the potential to perform well in the long run.
The stock returned approximately 71.6% in the last one year, outperforming the Zacks categorized Electronics - Semiconductors industry’s gain of 61.2%.
Let’s look at the reasons behind Cirrus Logic’s solid momentum.
What’s Driving the Stock?
Cirrus Logic is a premier supplier of high performance analog circuits and advanced mixed-signal chip solutions.
The company posted better-than-expected third-quarter fiscal 2017 results. The year-over-year comparisons on both the counts were also favorable. Notably, as per revenue segments, Portable audio product revenues accounted for approximately 92% of the total revenue last quarter. Cirrus Logic generates a significant portion of its revenues from Apple Inc. (AAPL - Free Report) .
The company is on a growth trajectory, gathering momentum from its positive earnings surprise history and strong fundamentals. It posted a positive earnings surprise in the last four quarters, with an average positive surprise of 58.1%.
Given that the company’s long-term earnings per share growth rate is 17.5% and has a Growth Style Score of “A”, we believe that the stock still has much upside potential.
Moreover, combined with other attractive features like high return on equity (ROE) and high return on assets (ROA), the stock looks quite attractive. While its ROE indicates that the company is reinvesting its cash at a high rate of return, ROA is the profit that a company earns for every dollar of its assets. Cirrus Logic currently trades at an ROE of 25.1%, a lot higher than the industry average of 19.1%. Notably, the company has an ROA of 18.3% compared with the industry average of 10.7%.
It needs to be noted that Cirrus Logic currently has a trailing 12 month P/E ratio of 17.61. This level compares favorably to some extent with what the industry saw over the last one year. The ratio is lower than the average level of 20.45 and is towards its lower end of the valuation range over this period. Hence, valuation looks favourable from a P/E perspective.
Furthermore, continued investments in the audio segment are expected to have a positive impact in the long run. Additionally, synergies from acquisitions and expansion in the LED market continue to drive growth.
Risks Remain
We remain cautious about the company as the current global economic downturn might have an impact on its performance in the to-be-reported quarter. Moreover, the company faces competition from the likes of Texas Instruments Inc. (TXN - Free Report) and STMicroelectronics N.V. (STM - Free Report) , which remains a headwind.
Bottom Line
Considering these positives, we believe Cirrus Logic is one such technology stock that deserves a place in investors’ portfolio. We can essentially filter the negatives and focus on the positives which drive price.
Cirrus Logic carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public. Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Click here for Zacks' private trades >>