Seeking Alpha
Value, registered investment advisor, growth at reasonable price, long only
Profile| Send Message|
( followers)  

Smart phones get all the glory. But smart device technology is about a lot more than watching cute kitties on your iPhone.

People are using their smart devices to get on elevators, ride a subway, buy gas, go to a sporting event. And much much more.

And one of the world leaders constantly making these devices more convenient - and safer - is NXP Semiconductors (NASDAQ:NXPI).

Business is booming around the world for this $13.3 billion technology company.

NXPI is selling their technology to places like Apple (NASDAQ:AAPL), Bosch, Continental, Delphi, Gemalto (OTCPK:GTOFF), Giesecke/Devrient, Huawei, NSN, Panasonic (OTCPK:PCRFF) and Samsung (OTC:SSNGY).

About 40% of their business is in China, and 7% in the United States.

When you talk about what NXPI does, the conversations quickly requires advanced training in electronic engineering. But when you talk about how they do it, that is a different conversation that the Best Stocks Now app handles just fine.

Data from Best Stocks Now App

Performance

When I look at stocks to decide whether they are a Best Stock Now, I look at short-term, intermediate, and long-term performance. I then compare the performance of the stock with its peers, the more than 3,800 stocks that I monitor in my Best Stocks Now app database.

Data from Best Stocks Now App

Over the last three years NXPI has returned 25.5% to investors, more than double the returns of the market during that same timeframe.

Over the last twelve months, the stock is a top performer with a 70.8% gain. This gives the stock a current momentum grade of A-.

This places it at or near the top of its class.

Valuation

While I like performance, I have seen way too many momentum darlings come crashing back down to earth due to astronomical valuations. We have had learned huge valuation lessons from incidents like the crash of the NASDAQ in 2000-2001, the crash of the housing market in 2007-2009, and many other such bubbles. VALUATION DOES MATTER!

Data from Best Stocks Now App

NXPI is currently trading at just 11.34 times forward earnings while the stock is expected to grow by nearly 36% per year over the next five years. That is the current analyst consensus estimate.

This means that NXPI is trading at a very steep discount to its growth rate. In fact, NXPI comes in with a PEG ratio of 0.32. Way less than the growth at a reasonable price (GARP) investors are looking for.

When I take NXPI's next year's earnings of $4.59 and extrapolate them out over the next five years applying the estimated annual growth rate plus a multiple that I find appropriate for such a company, I come up with a five-year target price of $92.27.

NXPI is currently trading at $52.05. In other words, it has 77.3% upside potential and receives a Gunderson Value Grade of 'B-'.

I typically require Best Stocks Now to have a minimum of 80% upside potential, but when I consider the incredible performance of NXPI combined with its satisfactory upside potential, I can't help take it to the next step and look at the stock chart.

Stock Chart

The Best Stocks Now app requires a healthy stock chart. I don't like sideways trends, I despise downtrends, and I get very nervous with extended uptrends, unless the valuation is compelling. And of course the most dangerous trend of all is a topping out trend that is beginning to roll over.

(click to enlarge)

NXPI is currently in a very, very healthy uptrend. The stock dipped towards the end of last April, but it has been going up ever since.

Out of 3,814 stocks in my Best Stocks Now app database NXPI comes in at #156 and it's a stock that I own at Gunderson Capital Management in my moderate growth accounts.

Data from Best Stocks Now App

Data from Best Stocks Now App

Source: NXP Semiconductors Has Delivered 25% Per Year Over The Last 3 Years