In an electronic world of increasingly complex integrated circuits and programmable devices, some semiconductor outfits manage to get along just fine offering simple analog and discrete chips. Success at one such firm is a function of high standards. Its facilities have been awarded prized ISO certfications for superior quality-control techniques.
Diodes Incorporated (NASDAQ: DIOD) is engaged in the design, manufacture and marketing of semiconductor products, including diodes, transistors, and rectifiers. The firm focuses on devices with end user applications in the consumer electronics, computing, industrial, communications and automotive sectors. Customers include Intel (NASDAQ: INTC) and Nortel Networks (NYSE: NT).
The stock popped last week, when the firm raised its third quarter financial outlook. Management now expects revenues
of $104-$106 million, versus Street consensus of $103.7 million. Third quarter gross margins are expected to be "slightly improved" from the level of the second quarter. Since their initial rise, the shares have been defining 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 issue with six "strong buys" and one "buy." Analysts see a 20% average annual growth rate, through the next five years. The DIOD PEG ratio (1.18), Price to Book ratio (3.74), Price to Cash Flow ratio (15.63), Sales Growth rate (16.44%), EPS Growth rate (29.63%), Net Profit Margin (14.51%) and Return on Assets (10.88%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $21.87 and $32.23. A stop-loss of $28 looks good here. Note that the firm is expected to report final Q3 numbers in early November.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
Reid Hoffman: LinkedIn will go public (at some point)
Retailers can't wait for Black Friday, open Thursday
Tiffany's serves up solid quarterly earnings
