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Bull Of The Day: Cirrus Logic (CRUS)

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Cirrus Logic (CRUS - Free Report) is a Zacks Rank #1 (Strong Buy) following a strong earnings report at the end of July.  While August saw a lot of chip stocks lose ground, CRUS held serve and is now poised to drift higher.  Let's take a look at why this stock is a Zacks Rank #1 (Strong Buy) in this Bull of the Day article.

Description

Cirrus Logic, Inc., a fabless semiconductor company that makes and sells analog and mixed-signal integrated circuits (ICs) in the United States and internationally. It offers portable products, including codecs-chips that integrate analog-to-digital converters (ADCs) and digital-to-analog converters (DACs) into a single IC; smart codecs, a codec with digital signal processer and several others. The company markets and sells its products through direct sales force, external sales representatives, and distributors. Cirrus Logic, Inc. was founded in 1984 and is headquartered in Austin, Texas.

Recent Earnings

At the end of July the company reported EPS of $0.19 when the Zacks Consensus Estimate was calling for a loss fo two cents.  That works out to be a beat of 21 cents for a 1050% positive earnings surprise.  Revenues came in at $238.25M when $221M were expected so it was a beat on top and on bottom as well.

The company then guided the next quarter revenue to a range of $300M - $340M when the consensus was at $297M.

Estimates Jump Higher

This wasn't the first time CRUS posted a huge earnings suprise.  The previous quarter the company posted EPS of $0.16 when a loss of $0.05 was expected.  This was another 21 cent beat and 420% positive earnings surprise.

Analysts have now moved number much higher.  THis quarter saw estimate jump from $0.41 to $0.77 and next quarter increased by a dime to $0,87.

The full year number has moved from $1.48 to $2.08 over the last 60 days and the 2021 (fiscal) number has moved from $1.64 to $2.09.

Valuation

The valuation looks really good for a chip stock with a forward earnings multiple of 19.9x and a price to book of 2.9x.  Value investors like to pay less than the broader market multiple (typically 16x -18x forward earnings) and a price to book of less than 3x.  The recent shift from growth to value plays has stung stock with high price to sales multiples, but CRUS is trading at only 2.7x sales.  Net margins have increased from 7.68% two quarters ago to 8.46% and that is just what investors love to see.

Chart

 

Cirrus Logic, Inc. Price, Consensus and EPS Surprise

Cirrus Logic, Inc. Price, Consensus and EPS Surprise

Cirrus Logic, Inc. price-consensus-eps-surprise-chart | Cirrus Logic, Inc. Quote

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