Its hard to trust company that looks too good on paper. But Cirrus Logic (CRUS) is a good example of a growth company that enjoyed good earnings increase in the past year and still has plenty of room for more growth for the next couple years. In a nut shell Cirrus Logic makes audio components for gadgets. Lately most of it has been for Apple for products such as iPhones and iPads. So much that last quarter, 91% of their revenue ended up coming from Apple product. The stock closed friday at $27.51, which is a discount from what it was a few months ago. But here is more detail into why I am buying the stock:
In Figure 1 We can see their earnings per share for the past five quarters. Each time they were able to beat analyst estimates. The estimates for the next two quarters are also notably higher then four of the five past quarters.
Figure 2 Represents the same EPS (earnings per share) annually. Green colored bar represents the actual EPS compared to the gray, estimated. In here we can see that the estimated anual EPS for the upcoming year to more than double the past year’s.
The revenues of the company show a parallel result compared to the company’s EPS numbers. We see the estimated revenue of 2013 in Figure 3 to be around $814 million. This is a 90% increase compare to the revenue of $427, the company generated in 2012!
Earnings dont mean a lot if the price of the stock is already high. But this is not the case here. P/E ratio of the CRUS is 11.6 which is low for this growth company. This means the investors are not yet willing to pay a premium for this great company. The 52 week range of the stock is $20.28 – $45.49, so it is closer to the bottom then the top.
I believe holding this stock for the next couple earnings will yield a nice return for the investor. Because of the combinations of recent solid earnings, future forecasted earnings by analysts and sales fueled by their great business partner Apple, the stock should rally for more then 30% from where it is now before the end of summer. Therefore my target price of the stock is around $37 and it should be held by anyone who is looking to make money in the market.