Believe it or not, one of the oldest semiconductor companies in the world is now in its 50th year of operations. Even more interesting is the fact that it's not in the Silicon Valley. To find these folks, you have to go to South Portland, Maine.
Fairchild Semiconductor (NYSE: FCS) offers a broad portfolio of components for electronic applications in the computing, communications, consumer, industrial and automotive markets. Products include logic chips, power and signal components, optoelectronics, non-volatile memory chips and diverse categories of analog and mixed-signal chips. The company also provides contract manufacturing services to other semiconductor makers. Competitors include Texas Instruments (NYSE: TXN) and Intel (NASDAQ: INTC).
The Street was surprised last week, when the firm reported Q3 EPS of 27 cents and revenues of $426.8 million. Analysts
had been looking for 20 cents and $420.9 million. The CEO attributed the solid quarter to robust computing and handset demand and to operating expense controls. Management also issued in-line guidance for Q4 revenues and estimated that gross margin would be about 50-150 basis points higher (quarter to quarter). FCS shares popped on the news and have now begun to define 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 three "strong buys," three "buys," five "holds" and three "sells." Analysts expect a 49% growth rate, through the next year. The FCS Price to Sales ratio (1.41), Price to Book ratio (1.96) and Price to Cash Flow ratio (14.28) 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 400 MidCap Index. Over the past 52 weeks, it has traded between $15.51 and $20.55. A stop-loss of $16.40 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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