<<Its not cheap at 40x earnings and 6-7 time sales?>>
Yes and no. The company has 95% gross margins which is way more than any other company, so price/sales is not really as high as it looks.
The P/E is indeed high, but don't forget the $2.25 cash per share. Also, at these gross margins, every $10M in extra sales adds 33 cents per share to gross margin. IMO it won't take very many years before EPS is a real number. Also, I think that if Apple were to finally adopt their technology the stock would see $12-15 fairly quickly.
Note that the (fantastic) quarter just reported is their seasonally strong one, as they stated. So EPS for the whole year might not be more than a dime.
That said, I have been quite positive on the company ever since they got rid of the previous CEO, switched to the licensing/royalty business model over a year ago and cut costs - well within their ability to execute. For the last 18 months, the stock has been a buy at the bottom of the rising channel. That may continue to be the case.
Thats asssuming everything stays stagnant. If they more design wins, they could easily start making well over $10mm to $20mm in per qtr sales. The guy from ATML said he is surprised Apple hasnt gone with Immersion technology but they could at any time.