OmniVision Technologies: Cash Rich Smartphone Supplier Is Much Too Cheap

It is very unusual to find a company that has almost half its market capitalization in cash, especially one that is growing revenue in a high profile space such as tablets and smartphones. However, OmniVision Technologies (NASDAQ:OVTI) is one such equity whose rock bottom valuation makes it a compelling bargain after losing half its value over the last few months.
“OmniVision Technologies, Inc. engages in designing, developing, and marketing semiconductor image-sensor devices worldwide. The company primarily offers CameraChip image sensors, which are single-chip solutions that integrate various functions, such as image capture, image processing, color processing, signal conversion, and output of a processed image or video stream for use in various consumer and commercial mass-market applications; and CameraCube imaging devices that are image sensors with integrated wafer-level optics”. (Business Description from Yahoo Finance.)
8 reasons OVTI is undervalued at under $17 a share:
  1. It has over $7.50 in net cash per share on its balance sheet.
  2. OVTI is selling near the bottom of its five-year valuation range based on P/S, P/E, P/B and P/CF.
  3. Stripping out cash, OVTI is selling for less than 4 times current earnings.
  4. It has beat consensus earnings estimates 11 out of that last 12 quarters. The average beat over consensus the last four quarters has been 15%.
  5. OVTI is selling at a forward PE of just 7 (not removing cash in calculation), which is a 58% discount to its five year historical average.
  6. The company is selling 6 times operating cash flow and is expected to grow revenue around 10% for both 2011 and 2012.
  7. OVTI is selling at a five year projected PEG of just .46, an over 60% discount to its five-year historical average.
  8. OmniVision Technologies is significantly under analysts’ estimates. S&P has a $27 price target on OVTI and the median analyst price target on this company is $29.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in OVTI over the next 72 hours.