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Entropic Communication

Entropic Communications is a fabless semiconductor company, designs, develops and markets system solutions to enable connected home entertainment. Its products include integrated circuits and related software associated with home networking solutions based on the Multimedia over Coax Alliance standard; direct broadcast satellite (NYSEARCA:DBS) services; high-speed broadband access; and silicon tuners. The company's products enable the delivery of various streams of high-definition television-quality video, standard-definition television-quality video, and other multimedia content, such as movies, music, games, and photos into and throughout the connected home. It serves telecommunications carriers, cable operators, and DBS service providers, as well as the providers of over-the-top services. Entropic Communications offers its products through its direct sales force, as well as through a network of sales representatives and distributors worldwide. 

Between the quarter ending March 31, 2011 and the quarter ending September 30, 2011 revenue at Entropic declined by $20 million. While revenue declined cost of goods sold remained relatively constant as a percentage of revenue. Gross income is roughly 55 percent of revenue.

Research and development spending has increased from $12.4 million or 20 percent of revenue to $15.1 million or almost 30 percent of revenue. Spending on research and development usually results in products with superior technology.

Net income at Entropic is roughly 15 percent of revenue and the company has a low debt-to-equity ratio. The low debt level makes Entropic a relatively safe investment and net income that is 15 percent of revenue makes Entropic a relatively high margin company. 

Entropic is trading at a market value of $428 million and has $130 million in cash and short-term securities on the balance sheet. Entropic's enterprise value is $298 million and operating income for the twelve months trailing is $53.1 million. The enterprise value-to-operating income ratio for Entropic is 5.61 and the price-to-earnings ratio is 6.02. The price-to-book value ratio is 1.5.


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.