National Semiconductor (NYSE: NSM) manufactures
a broad range of analog and mixed signal semiconductor devices and subsystems. Products include power management circuits, display drivers, audio and operational amplifiers, interface products and data conversion devices. These are used in communications, networking, automotive, test measurement and aerospace applications. Customers include IBM (NYSE: IBM), Motorola (NYSE: MOT) and Sony (NYSE: SNE). Texas Instruments (NYSE: TXN) is a major competitor.
The firm pleased investors last week, when it reported Q4 EPS of 34 cents and revenues of $462 million. Analysts had been looking for 26 cents and $449.5 million. The gross margin of 65.9% was up sequentially and year over year, driven by cost efficiencies and an improved product mix of higher-value analog devices. Management also guided Q1 revenues to $460-$475 million ($451.22M consensus) and FY09 EPS to about $1.45-$1.51 ($1.24 consensus).
NSM shares
popped on the news and have since been defining a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with one "strong buy", eight "buys", thirteen "holds" and one "underperform". Analysts expect a 17% growth rate, through the next year. The NSM Price to Free Cash flow ratio (11.93), EPS Growth rate (22.79%), Operating Margin (27.00%), Net Profit Margin (17.62%), Return on Assets (15.41%), Return on Investment (17.94%) and Return on Equity (35.31%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 85% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $16.21 and $29.38. A stop-loss of $19.75 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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