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Bull Of The Day: Silicon Motion Technology (SIMO)

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Silicon Motion (SIMO - Free Report) is a Zacks Rank #1 (Strong Buy) and along with other chip stocks, it has been running of late.  Let's take a look why this stock has risen to the highest Zacks Rank in this Bull of the Day article.

Description

Silicon Motion Technology Corporation, together with its subsidiaries, designs, develops, and markets NAND flash controllers for solid-state storage devices. It offers solid-state drive (SSDs) used in PCs and other devices, as well as embedded multimediacard (eMMC) and UFS mobile embedded storage used in smartphones. The company also provides enterprise-grade SSDs used in data centers; and small form-factor specialized SSDs used in industrial, commercial, and automotive applications. It sells its controllers under the SMI brand; data center SSDs under the Shannon brand; and single-chip industrial-grade SSDs under the Ferri SSD and Ferri-eMMC brands. The company markets and sells its products through direct sales personnel and independent electronics distributors to flash makers, module makers, hyperscalers, and OEMs. It operates in Taiwan, the United States, Korea, China, Malaysia, Singapore, and internationally. Silicon Motion Technology Corporation was founded in 1995 and is based in Kowloon, Hong Kong.

Earnings History

Whenever I look at a stock I start with the earnings history. SIMO has a great earnings history with 4 beats in the last 4 quarters.  

Over the course of those beats, the average positive earnings surprise works out to be 10%.

We like to see that as it tells us that management knows how to communicate to Wall Street where expectations should be.

Estimate Revisions

I see a lot of positive earnings estimate revisions for SIMO.

This quarter has increase from $0.63 to $0.70 over the last 60 days.

Next quarter has also moved higher from $0.61 to $0.68 over the same time period.

The full year 2020, which is over and just needs to be reported has inched higher to $3.08.

This year has moved from $3.08 to $3.29 over the time period that will impact the Zacks Rank... and that happens to be 60 days.

Valuation

In reporting 14% topline growth in the most recent quarter, the stock trades at 15x forward earnings.  That is below the market multiple of around 18x.  The price to book of 3x is right where value players will remain interested in the name as well.  

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