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Cirrus Logic Inc. Message Board

  • bot_feeder bot_feeder Feb 27, 2013 4:11 PM Flag

    crus

    CRUS looks like an interesting value play. One thing I can't figure out: Yahoo shows a projected PE ratio of about 6. Projected annual revenue is about 1 billion. According to existing revenue, it looks like gross margin is about 1/3 of revenue, so on a revenue base of 1 billion that would be annual gross margin of about 330 million.

    At market cap of 1.56 billion, if they achieve a PE ratio of 6 then their net income would have to be about 260 million.

    If they achieve gross margin of 330 mil, is it realistic to achieve net profits of 260 mil? That only leaves about 70 mil for annual SG&A plus R&D.

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    • I guess if their results in 4Q2012 continue then it is indeed realistic. For one thing, gross margin is running more like 50%, not 33%. And SG&A plus R&D is indeed fairly modest. So I guess the PE of 6 is believable if the business continues to hum.

      Now let's see if I can justify buying this stock. A projected PE margin of 6 sounds great, to me anything under 10 suggests a good stock value. The other metric I normally use is enterprise value to gross margin.

      If they can achieve gross margin of 500 million in 2013, at an enterprise value of about 1.5 billion, that's a EV/GM ratio of 3.

      On a tech growth stock, I consider an EV/GM ratio of 3 or less to be a good value. So these guys meet that criterion too.

      I guess I will have to buy some of this stock. In general I am a little wary of fabless semiconductor companies, but these guys' numbers are awfully impressive.

      The one other thing I wonder is customer distribution. Did I read correctly on their viewgraphs that their biggest customer accounts for 90% of their revenue? Assuming that's true, that's the one thing that would make me somewhat nervous. Assuming it's true, it must be common knowledge who that customer is. Could someone let me know who that customer is?

 
CRUS
51.94+0.62(+1.21%)Sep 27 4:00 PMEDT