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Anatomy of Success: Smart Global Holdings (SGH)

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Discovering which stocks are best positioned to see their price increase is surely a daunting task, but by utilizing a tool like the Zacks Rank, it becomes much easier, and much more profitable.

Stocks with a #1 (Strong Buy) ranking have a long history of outperforming the markets over a one-to-three-month time period, and it’s important to note that only 5% of the Zacks Rank universe receives this unique grade. Not only does this ranking system help identify the most elite companies, but it also enables people to hold a certain security while it continues to gain in value beyond the three-month investment horizon.

Below, we highlight a stock that has evolved into a strong player in the broad semiconductor industry, and by following our ranking system, investors could have realized major gains.

Smart Global Holdings (SGH - Free Report)

Smart Global is a designer, manufacturer and supplier of electronic subsystems to OEMs. It engages in the computer, industrial, networking, telecommunications, aerospace and defense markets, and operates primarily throughout the U.S., Europe, Asia and Latin America.

SGH was first added to the Zacks Rank #1 (Strong Buy) list after it reported its fiscal 2017 fourth quarter results. Earnings of 79 cents per share easily beat the Zacks Consensus, while net sales surged 53% to $223 million. Additionally, the company noted that demand from its networking and storage customers has increased, driving healthy growth in SGH’s Specialty Memory business. At the closing bell on October 6, shares of the semiconductor company closed at $32.81.

The company kept up this Strong Buy run until the beginning of February, during which it reported more strong numbers during its fiscal 2018 first quarter. Both Smart Global’s top and bottom lines beat the Zacks Consensus, with revenues soaring 67% year-over-year. And, sales, gross margin, and EPS all exceeded the high end of its revised guidance for Q1.

SGH was added to the top rank list again at the end of March after posting impressive Q2 results. Earnings of $1.73 came in 40 cents higher than the Zacks Consensus, and revenues once again saw double-digit year-over-year growth. Thanks to Brazil’s improving economy, Smart Global remained confident in its ability to drive additional growth and improvement in SMART Brazil. About six months after first hitting the top of the Zacks Rank, SGH closed up 52% to $49.84 per share.

The company was given the #1 title a third time in late April, most likely due to bullish analyst sentiment as Smart Global prepared for its third quarter earnings report. Nearly eight months after becoming a #1 stock pick, SGH increased over 25% to $41.22 per share (despite slumping a bit from its March highs). Currently, Smart Global is a #3 (Hold) on the Zacks Rank, and shares have risen over 100% in the past one-year period.

This table shows the price performance of SGH (in red), as well as the 12-month forward looking EPS estimate (in green) from the time the stock first earned a Zacks Rank #1 (Strong Buy). During this stretch, SGH never moved lower than a Zacks Rank #3 (Hold).

By utilizing the Zacks Rank, investors are able to easily identify elite stocks that are best positioned to beat the market on a consistent basis, and how to hold those top stocks as they continue to grow.

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