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Debt-Free Companies Of The S&P 500 - Skyworks Solutions

Matthew Utesch profile picture
Matthew Utesch


  • Skyworks Solutions is the third debt-free company that I have chosen to cover in the debt-free series.
  • Skyworks Solutions is outside of my normal businesses I cover because the semiconductor industry changes too rapidly for me to keep up with.
  • Skyworks is diversified with a number of clients but investors need to be aware that a few clients make up a large part of the company's revenue.
  • Outstanding share count has been reduced by more than 10% over the last five years.
  • DGI investors should take note that the dividend has more than tripled since 2014.

The semiconductor industry is something I tend to avoid covering largely because the pace with which technology is changing often times exceeds what my brain can keep up with. This doesn't mean that I won't invest in the industry, but it does mean that I will let smarter individuals who have engineering backgrounds do most of the coverage for me.

With that said, writing this article on Skyworks Solutions (NASDAQ:SWKS) is something that falls outside of my comfort zone and I believe it will be an opportunity to learn something new about an interesting company/industry even though I will be focusing on the financials more than the underlying technologies developed by SWKS.

I wanted to start by finding a competitor or two that I can make some comparisons with because I think it can be helpful to see where SWKS fits within its industry. There are a lot of competitors in this fast-changing industry but I don't see any specific company that stands out as a pure-play direct competitor. In the 2019 10-K Report, I was led to Qorvo (QRVO) which is a large supplier for Apple (AAPL) and whose business model is largely dependent on the growing sales of AAPL's devices.

The history of both companies goes back a few decades but both companies have only existed in their current form since the turn-of-the-century. SWKS was the result of a merger between Alpha Industries and the wireless communications segment of Conexant on June 26, 2002. The merger that created QRVO took place on January 1, 2015, and involved TriQuint Semiconductor and RF Micro Devices.

Because QRVO has only existed in its current form for a little more than five years, is more difficult to show the long-term price performance relative to one another. The graphs below provide total

This article was written by

Matthew Utesch profile picture
**Effective 8/20/2023 I will be looking to change platforms because Seeking Alpha has indicated it will no longer support the publishing of my retirement article series John & Jane because it involved too much previous history analysis. I plan to continue this series in a video format on YouTube and apologize in advance for my delay as I build this out.https://www.youtube.com/@consistentdividendinvestor/featuredGraduated in 2011 with degrees in Pre-Law and Business Administration from Eastern Washington University. Completed my MBA at Whitworth University in May of 2017. Over the last decade, I have worked exclusively in the finance industry. I have acquired specialized knowledge in multiple areas, most notably, Secondary Marketing, Underwriting (specializing in subprime credit), and recently established an Indirect Auto Dealer Lending Program for Canopy Federal Credit Union. I am now the Director of Indirect and Retail Underwriting.Started my first Roth IRA at the age of 16, but began seriously investing closer to 2011 at the age of 22. My investment strategy is largely focused on generating retirement income from dividend-paying stocks. I do not hold any professional investment licenses, but I spend a significant amount of time educating children, teenagers, and young adults on basic finance. I also specialize in cash-flow analysis for those nearing retirement or who are in retirement.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This article reflects my own personal views and I am not giving any specific or general advice. All advice that is given is done so without prejudice and it is highly recommended that you do your own research. This article was written on my own and does not reflect the views or opinions of my employer.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (16)

TechStock Hunter profile picture
I do agree with your analysis of share buybacks & dividends for debt-free companies, this is one reason I started a position in Skyworks since Q4 2016. Any more thoughts on this company in the light of their latest results (stellar)...?
mdfuller_OR profile picture
Another generic comment but applicable here. The article is a ‘stock’ analysis - financial metrics, not a ‘business’ analysis. I would like to see more deep dives into products, technology, supply chain, and operations to balance the financial work. For investors like me (older who leaned investing from depression survivors we buy businesses, not stocks)
glssmrbl profile picture
@Plans & Clues

That's correct. The business metrics always supersede the stock. Even during a deep recession.
IMPORTANT CORRECTION TO YOUR CONCLUSION: QRVO does not have a lower PE than SWKS. SWKS is significantly lower. The PS is higher because SWKS has superior margins.

Other than that, thanks for the opinion.
I'm not going to voice an opinion on the quality of investment in any of the mentioned companies but I do want to say that I always find it strange when PS is mentioned without making any reference to profit margin (a company selling $10 bills for $5 would have an excellent PS but.. well, you can figure out the rest).

All else being equal a company with a better profit margin will have a higher PS. SWKS PS is ~1.4X that of QRVO but their profit margin is 2X QRVO's... so the higher PS is certainly justified in that regard (I realize that other points were included when you mentioned that the higher PS was not justified and I think those points are important. I want to make my point anyway, independent of those points). In fact, if we assume that QRVO's PS is reasonable then SWKS's PS should be even higher than it already is. In my opinion, PE is really where you should be looking for companies that have been profitable for a long time and that look like they will continue to be profitable. I think people tend to ignore it because it's so simple but for these two companies it is my opinion that PS should be dropped in favour of PE. They're the same kind of company operating in the same market. A direct PE comparison will work. If one of the companies baked muffins maybe I'd look at PS.

I'd love to hear criticism of my line of thinking if anyone disagrees (sincerely).
Super informative. Am long QRVO (plus CCI and AMT). Hesitated with Skyworks. Will be taking another look soon. Thanks for the research!
Moon Kil Woong profile picture
Share repurchases are usually dumb for a company and often bad for the shareholder. It is much better to invest it by the company and save it for a rainy day if nothing else. That said, I like Shywork's not having debt which is smart and provides a cushion of safety for the investor.
If QCOM modems were so easy to replace then Intel would have been able to compete and not sold its division. I’m not saying that Apple can’t pull it off, but to suppose it’s a sure touchdown just because they picked up intels fumbled ball is a bit simple. That’s like saying Samsung is going to wipe out Apple cause they sell phones too. You can try, but trying isn’t doing.
Matthew Utesch profile picture

I don’t disagree with you. Expensive litigation and fees are one helluva motivator. If they can’t pull it off in 6 years that would be pretty incredible. Just to clarify I am not saying it’s a guarantee what they are doing but we will have to see how they execute.
The time to buy was on the 1st dip after the rebound ~4/3
Matthew Utesch profile picture

Yup, missed that window. :-(
RunawayBear profile picture
Long T Rowe - great company, great stock price right now.

I have been watching Skyworks for about a year but have been hesitant. Will re-look at it now, thanks.
Matthew Utesch profile picture

I share similar sentiments. Was able to pick up more TROW in the 90’s. SWKS has been put on the watchlist but we will need a bad quarter/news to probably get me back into a buy range.

Best of luck and thanks for reading.
glssmrbl profile picture
So debt-free companies are of interest only when a pandemic is present? What about those rational Debt/EBITDA figures of < 2.5? Or those companies with so much debt the SA author has elaborate in detail on spread out the maturity dates are to rationalize ownership?

FREE CASH FLOWWWWW as Mr. Wonderful says. Don't be caught blind following the trend once the problems arise.
Matthew Utesch profile picture
Yup, I only care about and invest in debt-free companies when the markets go to hell. The point of the exercise is to look at some debt-free companies and gauge some of their performance relative to ones that do use debt. Of course the pandemic made me even more interested in these companies but so did the ever growing debt of US Corporations.

Believe it or not I invest in tons of companies that have debt. FYI, I’ll be covering companies with net cash positions after I look at a few others. I am telling you now so you don’t go making crazy assumptions about why/what I am writing those articles for. I write them because I am interested. Nothing more, nothing less.
glssmrbl profile picture
@Matthew Utesch

My rant was not directed at you specifically. I don't even know if you've used that terrible Debt/EBITDA metric to evaluate financial health of companies. I'm simply surprised to find your article among many others that are suddenly paying attention to metrics such as debt-free that used to be absent just 3 months ago. Your article simply sparked my comment. And if you are focusing on companies that have FCF then you're doing it right. If not, then my previous comment applies. Debt alone is not an issue if it can be serviced with excess cash. If everyone waits for a pandemic or other crisis to start valuing companies instead of marketing them they'd be on top of the current dividend cuts. Is it crazy to believe everyone jumps on the current trend in their articles?

All the financial information in the world will not make you intelligent if you're not using it rationally. Again, speaking to the bulk of SA authors out there. And I'm not compiling a list of names.
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