InterDigital ( have been strong performers lately, with the stock up 28% over the past month. The stock hit a new 52-week high of $99.23 in the previous session. InterDigital has gained 100% since the start of the year compared to the 47.2% move for the Zacks Computer and Technology sector and the 5.4% return for the Zacks Wireless Equipment industry. IDCC Quick Quote IDCC - Free Report) 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 November 2, 2023, InterDigital reported EPS of $2.13 versus consensus estimate of $1.19 while it beat the consensus revenue estimate by 41.61%.
For the current fiscal year, InterDigital is expected to post earnings of $8.59 per share on $536.76 million in revenues. This represents a 179.8% change in EPS on a 17.25% change in revenues. For the next fiscal year, the company is expected to earn $6.29 per share on $450.88 million in revenues. This represents a year-over-year change of -26.81% and -16%, respectively.
InterDigital 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. 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.
InterDigital has a Value Score of B. The stock's Growth and Momentum Scores are D and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 11.5X current fiscal year EPS estimates, which is not in-line with the peer industry average of 11.6X. On a trailing cash flow basis, the stock currently trades at 17X versus its peer group's average of 12.1X. Additionally, the stock has a PEG ratio of 0.66. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, InterDigital 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 InterDigital fits the bill. Thus, it seems as though InterDigital shares could have a bit more room to run in the near term.
How Does IDCC Stack Up to the Competition?
Shares of IDCC 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
Aviat Networks, Inc. (. AVNW has a Zacks Rank of # 2 (Buy) and a Value Score of A, a Growth Score of C, and a Momentum Score of C. AVNW Quick Quote AVNW - Free Report)
Earnings were strong last quarter. Aviat Networks, Inc. beat our consensus estimate by 10.13%, and for the current fiscal year, AVNW is expected to post earnings of $3.83 per share on revenue of $370.82 million.
Shares of Aviat Networks, Inc. have gained 17.2% over the past month, and currently trade at a forward P/E of 7.92X and a P/CF of 9X.
The Wireless Equipment industry is in the top 18% of all the industries we have in our universe, so it looks like there are some nice tailwinds for IDCC and AVNW, even beyond their own solid fundamental situation.