AU Optronics' (NYSE:AUO) valuation is bordering on the absurd. A company growing strongly in a great market shouldn't be trading at less than 6x earnings. Estimates have increased 19 cents over the past month. Two of the five covering analysts have raised their numbers.
AU Optronics Corp. engages in the design, development, manufacture, assembly, and marketing of thin film transistor liquid crystal display (TFT-LCD) panels and other flat panel displays.
The company's TFT-LCD panels are used in computer products, such as notebook computers and desktop monitors; consumer electronics products comprising mobile devices, digital cameras, digital camcorder, car television, car navigation systems, portable televisions, multiple function machines, printer displays, portable game consoles, and portable digital versatile disk players; and LCD televisions.
AUO recently announced a plan to set up a T$1.5 billion ($50 million) company making light emitting diode [LED] backlights for displays. The move aims to help the company secure supplies of LED backlights, a key component for thin liquid crystal displays, the company said in a statement to the Taiwan Stock Exchange.
The company blew the doors off of its first-quarter earnings report. It came in with earnings of $1.12 per share, 133% above the estimate of 48 cents. Strong demand for flat-screen TVs lifted prices for its displays.
Mr. Max Cheng, Chief Financial Officer and Spokesperson of AUO noted that while Q1 is low season, AUO was able to hit the 2nd record high in its quarterly profitability, bringing net income to nearly NT 27 billion, which represented 18.5% sequential decline but a remarkable improvement from a net loss of NT 5.1 billion in 1Q2007.
The valuation on AUO is ridiculously cheap. It is currently selling for 5.8x current-year estimates of $3.38 per share. Those estimates have increased 19 cents over the past month. Two of the five covering analysts have raised their numbers.