Anadigics: Got your non-silicon RFICs right here

Much of what we call "technology" is critically dependent on the operation of semiconductor integrated circuits. There is a firm in Warren, New Jersey that has put a non-silicon spin on the fabrication of such devices, with good results.

Anadigics Inc. (NASDAQ: ANAD) makes gallium arsenide (GaAs) and indium phosphide (InP) radio frequency integrated circuits (RFICs) for the broadband wireless and wireline communications markets. The physical properties of GaAs and InP allow the firm to make chips that are smaller, faster and more energy efficient than the usual silicon-based devices. The company focuses on applications for wireless local area networks, cable set-top boxes, cell phones, cable television systems, microwave systems and fiber-to-the-premises communications systems. Customers include Intel Corp. (NASDAQ: INTC) and Motorola Inc. (NYSE: MOT).

The firm surprised the Street last week, when it reported Q2 EPS of three cents and revenues of $53.9 million. Analysts had been looking for two cents and $52.6 million. Management also guided Q3 EPS to six cents (five cent consensus) and Q3 revenues to $59.3 million ($56.91M consensus). Needham, Roth Capital and Charter Equity subsequently declared ANAD a "buy."

The stock popped on the news and is 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.

Altogether, brokers now recommend the issue with six "strong buys," three "buys" and four "holds." Analysts see a 61% growth rate, through the next year. The ANAD Price to Book ratio (3.91), Sales Growth rate (37.15%) and EPS Growth rate (-0.06 to 0.03 yr/yr) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 93% of the outstanding shares. Over the past 52 weeks, the stock has traded between $5.03 and $15.67. A stop-loss of $12.75 looks good here.

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