Looking to add some growth to your portfolio? For a closer look at the semiconductors industry of the tech sector, we ran a screen you may be interested in.
We began by screening the semiconductors industry for companies with strong liquidity, with current ratios above 3. The current ratio is current assets/current liabilities, so ratios above 3 indicate the company has at least 3 times the liquid assets to cover their short-term liabilities.
We then screened for those with strong profitability compared to industry peers, with higher gross, operating, and pretax margins than their industry averages by at least 5% on each margin. This indicates that these companies are taking a greater percentage of their revenues as profits, and they also have stronger control over their cost structures.
Interactive Chart: Press Play to compare changes in market cap over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.
We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.
Do you think these companies will continue to see big profitability? Use this list as a starting point for your own analysis.
List sorted by difference between pretax profit margin and industry average.
1. Altera Corp. (ALTR): Designs, manufactures, and markets programmable logic devices; structured application-specific integrated circuit devices; predefined design building blocks or intellectual-property cores; and associated development tools. Market cap at $10.75B, most recent closing price at $33.03. Current ratio at 4.07. TTM gross margin at 71.46% vs. industry average at 60.15%. TTM operating margin at 37.57% vs. industry average at 22.4%.TTM pretax margin at 37.73% vs. industry average at 20.74%.
2. CEVA Inc. (CEVA): And its subsidiaries engage in designing and licensing silicon intellectual property for the handsets, portable multimedia, and consumer electronics markets. Market cap at $394.45M, most recent closing price at $16.96. Current ratio at 11.46. TTM gross margin at 94.86% vs. industry average at 60.13%. TTM operating margin at 30.32% vs. industry average at 22.39%.TTM pretax margin at 35.81% vs. industry average at 20.73%.
3. Analog Devices Inc. (ADI): Engages in the design, manufacture, and marketing of analog, mixed-signal, and digital signal processing integrated circuits used in industrial, communication, computer, and consumer applications. Market cap at $11.15B, most recent closing price at $36.90. Current ratio at 8.82. TTM gross margin at 69.7% vs. industry average at 60.15%. TTM operating margin at 34.37% vs. industry average at 22.4%.TTM pretax margin at 33.74% vs. industry average at 20.74%.
4. Xilinx Inc. (XLNX): Designs, develops, and markets programmable platforms in North America, the Asia Pacific, Europe, and Japan. Market cap at $8.88B, most recent closing price at $33.38. Current ratio at 7.15. TTM gross margin at 67.4% vs. industry average at 60.15%. TTM operating margin at 28.85% vs. industry average at 22.4%.TTM pretax margin at 27.33% vs. industry average at 20.74%.
*Profitability data sourced from Fidelity, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.