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Overview

Previously, I wrote Round 8 of this article in which I listed and reviewed three low-priced stocks that I believed should be avoided. The stocks I reviewed in Round 8 were Arch Coal, Inc. (NYSE:ACI), CYS Investments, Inc. (NYSE:CYS) and VASCO Data Security International, Inc. (NASDAQ:VDSI).

For Round 9, I will once again focus on stocks that are currently priced at under $10. In determining why I find that these stocks should be avoided, I will be looking at each company's financial performance, current valuation, recent trading activity, dividend policy, earnings and future outlook. For this round, I have decided to focus specifically on technology related stocks.

Stock No. 1

Advanced Micro Devices, Inc. (NYSE:AMD) is a semiconductor company that develops computer processors and related technologies for commercial and consumer markets, operating in two main segments of computer solutions and graphics. The company was founded in 1969 and is headquartered in Sunnyvale, California.

Financial Performance

Gross Profit Margin (Quarterly)34.80%
Profit Margin (Quarterly)5.60%
Return on Assets (TTM)-2.04%
Return on Equity-18.12%
Revenue$5.30B
Revenue Quarterly Growth (YOY)37.58%

Looking at the chart below, you can see that Advanced Micro Devices has been unable to maintain any kind of significant long-term growth in either revenue or profit and has recorded negative growth in both over the past five years.

AMD Revenue (<a href=

AMD Revenue (TTM) data by YCharts

Compared to competitors such as ARM Holdings (NASDAQ:ARMH), this is poor performance in both areas.

AMD Revenue (<a href=

AMD Revenue (TTM) data by YCharts

Current Valuation and Recent Trading Activity

Advanced Micro Devices has a current PS ratio of 0.50x and a price-to-book value of 4.63x.

Advanced Micro Devices closed Friday at $3.43, $1.22 shy of its 52-week high and $1.17 higher than its 52-week low. It is trading below both its 50-day moving average of $3.85 and its 200-day moving average of $3.70.

Advanced Micro Devices has seen the following price returns:

1-Month Price Return-10.85%
1-Year Price Return32.69%
3-Year Price Return-55.94%

Looking at the chart below you can see that the stock has not been able to maintain long-term price appreciation and has dropped significantly in price over the past several years.

AMD Chart

AMD data by YCharts

Earnings

For its latest quarter, Advanced Micro Devices reported earnings per share of $0.06, which was in line with estimates and considerably better than the negative earnings reported for the same period last year. For the full year, earnings remained negative for Advanced Micro Devices. You can see in the chart below, that just like with revenue and profit, this company hasn't been able to produce any long-term growth of earnings.

AMD EPS Basic (<a href=

AMD EPS Basic (TTM) data by YCharts

Dividend

Advanced Micro Devices does not pay a dividend.

Company Outlook

Advanced Micro Devices has been unable to maintain any type of positive consistency in terms of revenue, profit, or earnings and because of this, the price of the stock has been erratic over its history. I don't see anything to suggest that this will change anytime soon and expect the company to continue to struggle with these issues. Because of this, as well as the pending lawsuit related to false/misleading statements by the company, I suggest investors to avoid this stock until it can show any type of consistency in growing earnings.

Stock No. 2

Flextronics International Ltd. (NASDAQ:FLEX) is a technology supply chain company that provides design and manufacturing services to original equipment manufacturers across various countries of the world. The company was founded in 1990 and is based in Singapore.

Financial Performance

Profit Margin (Quarterly)1.84%
Return on Assets1.56%
Return on Equity7.76%
Revenue$23.62B
Revenue Quarterly Growth (YOY)3.81%

Looking at the chart below, you can see that Flextronics International has seen sporadic revenue and profit with overall negative results over the past several years.

FLEX Revenue (<a href=

FLEX Revenue (TTM) data by YCharts

When compared to competitors such as Jabil Circuit (NYSE:JBL) and Plexus (NASDAQ:PLXS), you can see that Flextronics measures quite worse in both revenue and profit.

FLEX Revenue (<a href=

FLEX Revenue (TTM) data by YCharts

FLEX Gross Profit (<a href=

FLEX Gross Profit (TTM) data by YCharts

Current Valuation and Recent Trading Activity

Flextronics International closed Friday at $8.15, $1.56 shy of its 52-week high and $2.29 higher than its 52-week low. The stock is trading below its 200-day moving average of $8.34 but higher than its 50-day moving average of $7.66.

Flextronics International has seen the following price returns:

1-Month Price Return4.89%
1-Year Price Return31.24%
3-Year Price Return2.00%

Similar to Advanced Micro Devices, you can see that Flextronics International has not rewarded long-term investors with price appreciation of its stock.

FLEX Chart

FLEX data by YCharts

Earnings

Wednesday, Flextronics International reported earnings per share of $0.26 for its third quarter, which is above its prior guidance of $0.21 to $0.25 per share.

While this was impressive, looking at the chart below you can see that the company's long-term earnings growth is far from impressive.

FLEX EPS Basic (<a href=

FLEX EPS Basic (TTM) data by YCharts

Dividend

Flextronics International does not pay a dividend.

Company Outlook

While Flextronics International did report stronger than expected earnings, as well as stronger than expected sales and profit, I'm not that excited about it. I think it shows signs the company is headed in the right direction, but currently (after-hours), the stock is at $8.85 and I don't think it is a buy at this price. This company has had very nice quarters in the past, the problem has been consistency. Until the company can string together 3 or 4 quarters like this in a row, I would avoid the stock, especially considering the price jump this latest earnings report has created.

Stock No. 3

STMicroelectronics NV (NYSE:STM) is an electronics and semiconductor manufacturer that designs, develops, manufactures, and markets various semiconductor integrated circuits and discrete devices worldwide. STMicroelectronics was created in 1987 and has been publicly traded since 1994. It is headquartered in Geneva, Switzerland.

Financial Performance

Gross Profit Margin (Quarterly)32.85%
Profit Margin (Quarterly)-1.79%
Return on Assets-5.18%
Return on Equity-8.55%
Revenue$8.08B
Quarterly Revenue Growth (YOY)-6.80%

Looking at the chart below, you can see that revenue and profit for STMicroelectronics has been on a negative trend for the past few years.

STM Revenue (<a href=

STM Revenue (TTM) data by YCharts

When compared to other competitors in the semiconductor industry such as MagnaChip Semiconductor (NYSE:MX), Texas Instruments (NASDAQ:TXN), and Intel (NASDAQ:INTC), STMicroelectronics performance looks even worse, with only STM having negative growth in both revenue and profit.

STM Revenue (<a href=

STM Revenue (TTM) data by YCharts

STM Gross Profit (<a href=

STM Gross Profit (TTM) data by YCharts

Current Valuation and Recent Trading Activity

STMicroelectronics closed Friday at $8.19, $1.86 shy of its 52-week high and just $1.08 higher than its 52-week low. It is trading below its 200-day moving average of $8.30 but higher than its 50-day moving average of $7.77.

STMicroelectronics has seen the following price returns:

1-Month Price Return2.38%
1-Year Price Return-5.10%
3-Year Price Return-32.43%

Earnings

For its latest quarter, STMicroelectronics reported negative earnings per share of $0.01. This was the ninth quarter in a row that the company has reported negative earnings.

When looking at the competitors mentioned above, only MagnaChip Semiconductor shows positive earnings growth, but even the negative earnings from Texas Instruments and Intel look much better compared to STMicroelectronics' earnings since 2011.

STM EPS Basic (<a href=

STM EPS Basic (TTM) data by YCharts

Dividend

STMicroelectronics pays a $0.10 quarterly dividend that currently yields 5.04%. While the yield is nice, the dividend is not one that provides growth.

STM Dividend Growth (<a href=

STM Dividend Growth (TTM) data by YCharts

Company Outlook

In its latest report, STMicroelectronics stated that it expects to see a return to profit in 2014. I'm not sold, considering that in its last quarter sales continued to decline. I haven't seen any significant developments that lead me to believe the company will start to see prolonged growth in either revenue or earnings. Even if you are a dividend investor, I would recommend avoiding this stock for now as you can get similar yields from other stocks that have a history of actually growing their dividend.

Conclusion

Each of the companies reviewed above have shown histories of poor revenue, profit, and earnings growth. I haven't seen enough evidence from any of these companies that this is going to change any time soon. Because of this, I recommend avoiding these stocks when looking for long-term investments for your portfolio. For low-priced tech stocks that I think are worth looking at as potential buys, see Round 9 of my low-priced stocks to buy article. As always, I recommend individual investors perform their own research before making any investment decisions.

Source: Low-Priced Stocks To Avoid: Round 9