I predict revenues using seasonal statistical models. EPS based on past profit margins and shares outstanding. And price using an equation published by Ben Graham. For Ambarella my analysis indicates that the stock is undervalued relative to the performance of the underlying company. I expect the earnings report will show:
R^2 of the fit is 0.900 - so the model fits the last four years extremely well.
With a growth rate of 19% (CAGR of Revenue over the last four years) Ben's formula predicts a fair value of $36.00. Or, back solving using the current price, the market values the company as if it was expected to grow 6% per year in the future.
What do you think? Is there some business issue that means AMBA is about to hit some kind of wall? Or is the stock undervalued compared to how the company is doing?
I’m not disputing your analysis, but allow me to add to it. Etrade suggest that the annual EPS will be .60 cents. So you are no doubt in the ball park there. T.D. Ameritrade says, and I quote, “Based on its gross margin, operating margin, and net margin, AMBA converts a larger percentage of its revenues to profits than most other companies in the Semiconductors & Semiconductor Equipment industry. Furthermore, the company is profitable with an operating margin of 17.21%. AMBA is overall quite efficient in comparison to its peers with a Return on Assets, Return on Equity, and Revenues Per Employee of 17.77%, 19.70%, and $290,734.20 respectively. Despite average performance at generating revenues from employees, the company is among the best at managing their owner's equity and at managing their resources compared to other companies in the Semiconductors & Semiconductor Equipment industry .”