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Rambus (RMBS) Soars to 52-Week High, Time to Cash Out?

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Have you been paying attention to shares of Rambus (RMBS - Free Report) ? Shares have been on the move with the stock up 8.5% over the past month. The stock hit a new 52-week high of $30.31 in the previous session. Rambus has gained 0.8% since the start of the year compared to the -14.2% move for the Zacks Computer and Technology sector and the -13.9% return for the Zacks Electronics - Semiconductors industry.

What's Driving the Outperformance?

The stock has a great 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 February 7, 2022, Rambus reported EPS of $0.39 versus consensus estimate of $0.37 while it beat the consensus revenue estimate by 2.02%.

For the current fiscal year, Rambus is expected to post earnings of $1.48 per share on $516.28 million in revenues. This represents an 8.03% change in EPS on a 13.97% change in revenues. For the next fiscal year, the company is expected to earn $1.57 per share on $556.95 million in revenues. This represents a year-over-year change of 6.08% and 7.88%, respectively.

Valuation Metrics

Rambus 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.

Rambus has a Value Score of D. The stock's Growth and Momentum Scores are A and C, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 20.1X current fiscal year EPS estimates, which is not in-line with the peer industry average of 20.1X. On a trailing cash flow basis, the stock currently trades at 17.9X versus its peer group's average of 12.5X. 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 consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Rambus currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.

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 Rambus fits the bill. Thus, it seems as though Rambus shares could have potential in the weeks and months to come.

How Does RMBS Stack Up to the Competition?

Shares of RMBS have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Synaptics Incorporated (SYNA - Free Report) . SYNA has a Zacks Rank of # 2 (Buy) and a Value Score of D, a Growth Score of A, and a Momentum Score of D.

Earnings were strong last quarter. Synaptics Incorporated beat our consensus estimate by 4.49%, and for the current fiscal year, SYNA is expected to post earnings of $12.89 per share on revenue of $1.74 billion.

Shares of Synaptics Incorporated have gained 1% over the past month, and currently trade at a forward P/E of 17.59X and a P/CF of 19.77X.

The Electronics - Semiconductors industry is in the top 20% of all the industries we have in our universe, so it looks like there are some nice tailwinds for RMBS and SYNA, even beyond their own solid fundamental situation.


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