Intersil: Providing for semiconductor needs

From DVD recorders to computers and LCD TVs to satellites, if your electronic devices need analog chips, there is a firm in Milpitas, California that has you covered.

Intersil Corporation (NASDAQ: ISIL) is engaged in the design and manufacture of analog integrated circuits. Its product families address power management and signal processing functions in the high-end consumer, industrial, communications, and computing markets. The company sells its devices to original equipment manufacturers, original design manufacturers and contract manufacturers in the United States, Europe and Asia. Customers include Dell (NASDAQ: DELL) and IBM (NYSE: IBM). Texas Instruments (NYSE: TXN) is a major competitor.

Intersil surprised the Street last week, when it reported Q1 EPS of 29 cents and revenues of $167.7 million. Analysts had been looking for 28 cents and $164.7 million. Management also guided Q2 EPS to 30-31 cents (30 cent consensus) and Q2 revenues to $173-176 million ($170.95 million consensus). The CEO attributed the favorable outlook to a positive book-to-bill ratio and reduced inventory levels at distributors.

ISIL shares popped on the news and are now forming a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the stock with eight "strong buys", nine "buys", nine "holds" and three "sells". Analysts expect a twenty percent average annual growth rate, through the next five years. The ISIL Price to Book ratio (1.73), Price to Free Cash Flow ratio (23.48), EPS Growth rate (26.09%), Operating Margin (20.50%), Net Profit Margin (20.44%) and Net Income per Employee ($106.58k) compare favorably with industry, sector and S&P 500 averages.

Institutions own about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $20.26 and $30.99. A stop-loss of $26.25 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.