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 firm is expanding its reach, via the acquisition route. It completed its purchase of British chip maker Zetex, on June 9th. That led management to increase its guidance for Q2 revenues from $100-$106 million to $114-$117 million. The Street had been looking for $104.27 million. Guidance for gross profit was boosted from a sequential increase of 4-9% to a sequential increase of 18-21%.
The stock
popped on the news and has since been defining a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with six "strong buys". Analysts see a 24% growth rate, through the next year. The DIOD PEG ratio (1.18), Price to Book ratio (3.16), Price to Cash Flow ratio (13.14), Operating Margin (14.84%), Net Profit Margin (15.67%), Return on Assets (9.43%) and Return on Investment (10.79%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 83% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past fifty-two weeks, it has traded between $19.51 and $35.00. A stop-loss of $25.90 looks good here. Note that the firm is expected to report Q2 results at the end of July.
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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