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Alpha and Omega (AOSL) Soars to 52-Week High, Time to Cash Out?

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Have you been paying attention to shares of Alpha and Omega Semiconductor (AOSL - Free Report) ? Shares have been on the move with the stock up 20.8% over the past month. The stock hit a new 52-week high of $67.2 in the previous session. Alpha and Omega Semiconductor has gained 0.1% since the start of the year compared to the -12.2% move for the Zacks Computer and Technology sector and the -13.8% return for the Zacks Electronics - Semiconductors industry.

What's Driving the Outperformance?

The stock has an impressive 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, Alpha and Omega reported EPS of $1.2 versus consensus estimate of $1.05 while it beat the consensus revenue estimate by 2.83%.

For the current fiscal year, Alpha and Omega is expected to post earnings of $4.60 per share on $772.7 million in revenues. This represents a 57% change in EPS on a 17.63% change in revenues. For the next fiscal year, the company is expected to earn $4.88 per share on $821.85 million in revenues. This represents a year-over-year change of 6.09% and 6.36%, respectively.

Valuation Metrics

Alpha and Omega 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 has run ahead of itself.

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. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

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

In terms of its value breakdown, the stock currently trades at 13.2X current fiscal year EPS estimates, which is not in-line with the peer industry average of 21.1X. On a trailing cash flow basis, the stock currently trades at 13.5X versus its peer group's average of 13.5X. 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, Alpha and Omega 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 Alpha and Omega passes the test. Thus, it seems as though Alpha and Omega shares could have a bit more room to run in the near term.

How Does AOSL Stack Up to the Competition?

Shares of AOSL 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 Broadcom Inc. (AVGO - Free Report) . AVGO has a Zacks Rank of # 2 (Buy) and a Value Score of C, a Growth Score of A, and a Momentum Score of B.

Earnings were strong last quarter. Broadcom Inc. beat our consensus estimate by 2.82%, and for the current fiscal year, AVGO is expected to post earnings of $35.49 per share on revenue of $31.96 billion.

Shares of Broadcom Inc. have gained 6.1% over the past month, and currently trade at a forward P/E of 16.89X and a P/CF of 14.31X.

The Electronics - Semiconductors industry is in the top 31% of all the industries we have in our universe, so it looks like there are some nice tailwinds for AOSL and AVGO, even beyond their own solid fundamental situation.

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