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Investing In Smart Home Convergence Earnings Growth Sigma Designs

|Includes: AMAT, AVGO, INTC, NXPI, Sigma Designs, Inc. (SIGM), STM, TXN
Sigma Designs Smarthome

Sigma Designs (NASDAQ:SIGM) has seen estimates move dramatically higher over the last 60 days. The Current quarter was slated to show a loss of four cents, but then jumped to a gain of four cents. More recently the estimate ticked higher by another penny. The increases in earnings estimates have helped push the stock to a Zacks Rank #1 (Strong Buy) and today it is the Bull of the Day.

Top Billing

Sigma Designs is a semi-conductor company that has posted back to back solid beats of the Zacks Consensus Estimate. That is a good thing when the previous four quarters were all misses.

That factor alone won't make a stock the Bull of the Day. Add in the fact that the stock is in the very top industry rank and then you really have something.

Sigma Designs is an integrated semiconductor solutions provider in media platforms for use in the home entertainment and home control markets. The company was founded in 1982 and is headquartered in Milpitas, California.

Earnings History

As noted above, the last two quarters were beats. The April 2015 quarter saw the company post earnings of $0.06 when the Zacks Consensus Estimate was calling for a loss of $0.05. That is a huge swing of 11 cents. That translates to a positive earnings suprise of 220%.

The following quarter again saw a gain when the expectation was calling for a loss. The July 2015 quarter was reported in early September and saw a gain of 10 cents compared to the expectation of a loss of two cents. That 12 cent beat translates to a 600 positive earnings surprise.


The valuation for SIGM is mixed. The trailing and forward PE's are well above the industry average while the other commonly looked at metrics all show the stock trading at a discount to the industry averages. At 44x forward earnings, value investors will take a pass, especially when they see the industry average of 16x. But growth investors will focus on topline growth of 23% this fiscal year compared to 12% for the industry average. Earnings growth of 166% dwarfs the industry average of 15% in fiscal 2016, and the stock looks to post excellent earnings growth next year as well.

The price to book multiple of 2.1x show the stock trading at a discount to the 2.7x industry average. That same can be said of the price to sales multiple, which is 1.4x for SIGM and 2.6x for the industry.

Stock Chart Sigma Smarthome

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