Synaptics Likely to Continue Its High-Powered Growth

Synaptics (SYNA) is a Santa Clara, CA company that develops touchpad and customized user interface software for digital players, laptops, and mobile communication devices. Not only are they a provider of this technology, they are the leader in research and development on this technology with 13.9% of revenue going toward this area. This is why the potential for future gains with this technology player looks so strong.

Right now, SYNA is on a tear with EPS and sales growth. EPS has grown 140%, 140%, 38%, 21%, 29%, 39%, 110%, and 65% the past eight quarters. During that same time, sales growth has been 63%, 58%, 30%, 23%, 35%, 34%, 43%, and 28%. Growth this consistent is very hard to come by in this stock market environment and should not be taken lightly. Even 2009 earnings estimates call for a 64% increase.

The company does have 110% debt-to-equity ratio but also sports a powerful 32% return on equity with an EPS growth rate of 35%. This is why despite the debt mutual fund growth has grown from 123 funds to 138 funds to 144 funds the past three quarters. Management owns only 7% still but this isn’t a recent IPO (IPO was in 2002) so I can let that slide.

This is a great stock for growth investors but if SYNA can pull back to the 50 day moving average, with it only sporting a 16 P/E ratio right now, it would make a rather inexpensive buy for value investors. 16 is well into the lower end of the 5-year P/E range of 7-51.

Investor’s Business Daily gives the stock excellent ratings with a 97 EPS rating, a 92 RS rating, an SMR rating of A, an Acc/Dis rating of A, a Composite rating of 98, and a Timeliness rating of A. The dull spots include a lowly 39 rating for group RS (you can thank ZBRA, LOGI, and LXK for that weak number), a Sponsorship rating of E, and the short interest is only 9.8 days (4% of float).

The daily chart pattern of SYNA is very bullish with some very strong accumulation since January that has helped put the stock back near its recent 52-week highs. If SYNA can either base on low volume for at least 5 days and then breakout on very strong volume (with green BOP to max-green BOP on the lower window) or pullback to the 50 day moving average on low volume and then bounce on strong volume (with green BOP to max-green BOP), I would love to get long this leading stock.

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Disclosure: at the time of publication, the author did not have a position in SYNA.