By Roger Choudhury
We screened for companies with strong revenue growth over the past year and low debt to equity ratios. Here is what we found:
Assured Guaranty (AGO) is the only long-standing financial guaranty company writing new business today. The company guarantees public finance, global infrastructure, and structured finance transactions. It also has a reinsurance arm. The company has $617.1 billion in net par insured.
In 2010, the company grew revenues by 50.74% to $1.40 billion, after posting +68.04% in 2009. GAAP EPS also shot up by 286.67% to $2.90, after dropping 2.60% in 2009. The EBT margin improved to 45.35% from 14.30%. In 2011, the Street expects non-GAAP EPS to be between $3.11 (-10.8%) and $3.85 (+10.3%). In 2010, non-GAAP EPS was $3.49. The next earnings release is on May 9, when analysts expect to see between $0.69 (+46.8%) and $0.93 (+97.8%). In comparison, Q1 2010 produced $0.47. AGO shares trade with a price to sales multiple of 2.0. In 2005 and 2006, those multiples were 6.4 and 6.2, respectively. The company also has a debt to equity ratio of 0.28. Here is the latest company presentation.
AVX (AVX) is a leading international supplier of electronic passive components and interconnect solutions with 24 manufacturing and customer support facilities in 15 countries around the world. AVX offers a broad range of devices including capacitors, resistors, filters, timing and circuit protection devices and connectors.
In the first 9 months of FY 2011, revenues are up by 31.5% to $1.23 billion. Also, Non-GAAP EPS is up by 85.9% to $1.06. The EBT margin also has shown consistent improvement from 6.99% in FY 2009 to 13.51% in FY 2010 to 19.49% over the trailing 12 months.
The next earnings release is on April 28, with analysts expecting between $0.34 (+21.4%) and $0.35 (+25%). In comparison, Q4 2010 produced $0.28. AVX shares trade with a P/S multiple of 1.6. From 2004 to 2007, those multiples were 1.7, 1.9, 1.8, and 1.5, respectively. Any surprises should increase the multiple to 1.7x, but we believe that these shares are trading at the right multiple. The company also has no debt on its balance sheet. AVX shares also have a dividend yield of 1.4%.
Cypress Semiconductor (CY) delivers high-performance, mixed-signal, programmable solutions that provide customers with rapid time-to-market and exceptional system value. Cypress offerings include the flagship PSoC programmable system-on-chip families and derivatives such as PowerPSoC® solutions for high-voltage and LED lighting applications, CapSense® touch sensing and TrueTouch™ solutions for touchscreens. Cypress is the world leader in USB controllers, including the high-performance West Bridge® solution that enhances connectivity and performance in multimedia handsets. Cypress is also a leader in high-performance memories and programmable timing devices. Cypress serves numerous markets including consumer, mobile handsets, computation, data communications, automotive, industrial and military.
In 2010, revenues grew handsomely by 31.41% to $878 million, after dropping by 12.79%. GAAP EPS shifted to the right end of the number line to $0.40 from - $1.03. In 2008, it was - $2.86. Profit margins also improved to 55.74% from 40.52%.
In 2011, analysts expect non-GAAP EPS to be between $0.83 (-11.7%) and $1.24 (+31.9%). In 2010, non-GAAP EPS was $0.94. The next earnings release is on April 21, with analysts expecting between $0.19 (+11.7%) and $0.24 (+41.1%). In comparison, Q1 2010 produced $0.17.
CY shares trade with a price to sales multiple of 4.2. This is the highest level for these shares from 2001 to now. It appears as if investors have priced in the upper end of Q1 2011 estimates. The company also has no debt on its books.
ON Semiconductor (ONNN) is a premier supplier of high performance silicon solutions for energy efficient electronics. The company's broad portfolio of power and signal management, logic, discrete and custom devices helps customers efficiently solve their design challenges in automotive, communications, computing, consumer, industrial, LED lighting, medical, military/aerospace and power applications. ON Semiconductor operates a world-class, value-added supply chain and a network of manufacturing facilities, sales offices and design centers in key markets throughout North America, Europe, and the Asia Pacific regions.
In 2010, the company reaped in revenues of $2.31 billion, which was an increase of 30.78%, after dropping by 13.91%. GAAP EPS shot up by 364.29% to $0.65, after recovering to positive territory to $0.14 from - $1.00 in 2008. The EBT margin also improved greatly to 13.21% from 4.01%.
In 2011, the Street expects non-GAAP EPS to be between $0.90 (+0.1%) and $1.20 (+34.8%). In 2010, non-GAAP EPS was $0.89. The next earnings release is on May 4, with analysts expecting between $0.14 (-26.3%) and $0.24 (+26.3%). In comparison, Q1 2010 produced $0.19 for non-GAAP EPS.
ONNN shares trade with a price to sales multiple of 1.9. Looking from 2001 onwards, 2009 produced the best multiple with 2.2. Given 15%-plus growth in non-GAAP EPS, the current multiple is merited. The company also has a debt to equity ratio of 0.55.
Panasonic (PC) is a company based in Japan, and said on April 1 that an “announcement will be made promptly if a significant impact on Panasonic's consolidated financial outlook for fiscal 2011 is foreseen.”
In the first 9 months in FY 2011, the company increased sales by 127% to 6,653.4 billion yen ($4.67 billion). The company forecasts 8,900 billion yen in sales for the entire fiscal year 2011, which would be an increase of 20%. The EBT margin improved, but remain razor-thin at 3.4% compared to 1%, comparing 9M11 and 9M10. The next earnings release is on May 23. PC shares trade with a price to sales multiple of 0.3. From 2001 to 2007, those multiples were 0.5, 0.3, 0.5, 0.5, 0.6, 0.6, and 0.5, respectively. The company also has a debt to equity ratio of 0.59.
Taiwan Semiconductor Manufacturing (TSM) is the world’s largest dedicated semiconductor foundry, providing the industry’s leading process technology and the foundry’s largest portfolio of process-proven libraries, IPs, design tools and reference flows. The company’s managed capacity in 2009 totaled 9.96 million (8-inch equivalent) wafers, including capacity from two advanced 12-inch GIGAFABs, four eight-inch fabs, one six-inch fab, as well as TSMC’s wholly owned subsidiaries, WaferTech and TSMC China, and its joint venture fab, SSMC. TSMC is the first foundry to provide 40nm production capabilities. Its corporate headquarters are in Hsinchu, Taiwan.
In 2010, sales expanded by 41.9% to 419.53 billion TWD ($14.34 billion). Earnings per ADR shot up by 81.1% to 31.17 TWD from 17.21 TWD. The EBT margin also improved to 40.58% from 32.27%.
In 2011, analysts expect between non-GAAP earnings per ADR to be between $0.91 (-8.1%) and $1.15 (+16.1%). In 2010, that figure was $0.99. The next earnings release is on April 28, with analysts expecting between $0.24 (+20%) and $0.25 (+25%). In comparison, Q1 2010 produced $0.20.
TSM shares trade with a price to sales multiple of 4.5. From 2002 to 2007, the respective multiples were 5.6, 6.9, 4.9, 6.0, 5.8, and 5.3. We believe revenue growth of 25%-plus would merit a multiple well into the 5’s. The company also has a debt to equity ratio of 0.03.
Vishay Intertechnology (VSH) is one of the world's largest manufacturers of discrete semiconductors (diodes, rectifiers, MOSFETs, optoelectronics, and selected ICs) and passive electronic components (resistors, inductors, and capacitors). These components are used in virtually all types of electronic devices and equipment, in the industrial, computing, automotive, consumer, telecommunications, military, aerospace, power supplies, and medical markets. In 2010, the company grew revenues by 33.45% to $2.72 billion, after losing 27.64%. GAAP EPS climbed to $1.89 from -$0.31. In 2008, it was -$9.29. The profit margin showed significant improvement to 29.63% from 19.01%.
In 2011, analysts expect non-GAAP EPS to be between $1.82 (+15.18%) and $2.11 (+33.54%). In 2010, non-GAAP EPS was $1.58. The next earnings release is on May 2, with the Street expecting between $0.47 (+95.8%) and $0.52 (+116.6%). In comparison, Q1 2010 produced $0.24.
VSH shares trade with a price to sales multiple of 1.3. This is the highest multiple since 2003 had a multiple of 1.7. With improving EBT margins and given revenue growth in the 20’s, these shares should be trading at 1.5 times sales per share. The company also has a manageable debt to equity ratio of 0.29.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.