Mr. Orbach’s prediction for the next 5 years is that Silicom will be a $200M company and to get there from where we are today ($75.6M), that is a 22% per year increase in revenue. He also provided a range of $84-$90M for 2015 and I believe that he is under promising and will over deliver. That being said, if we look at the number for 2015 within the range he provide, this is what we would get:
$84M X .24% (avg. % net earnings)/7.1(mil shares)= earnings per share
84 X .24= 20.16 /7.1= $2.84 earnings per share for 2105
90 X .24= 21.6 /7.1= $3.04 earnings per share for 2105
At the 22% increase for the year, this would bring us to $92.23M
92.23 X .24= 22.1 /7.1= $3.11 earnings per share for 2105
Can Silicom actually get to $200 M in 5 years? Of course they can, but none of the analysts reports provide “the how”on them getting there. Silicom is creating new technologies that are being adopted by all of the high-end networking and network security OEM’s. These are mostly 10 Gb solutions today, but will be migrated to 40Gb and/or 100 Gb over the next 5 years and Silicom is in the driver seat to provide all of these solutions. And at a higher price.
They are in a very good position to address the future requirements for their customers, but until they get more analysts to cover them, they may never get to a PE of 20 or more.
I have been lurking for a while as I was mainly in cash for about 6 months. I started getting back into SILC about a month ago in the $32-$35 range based on last quarters conference call. The tone of the call sounded to me like they were back in with the customer they lost and it was the first time I can remember that the CEO stated they would be at $200M in 5 years There was something behind that statement and unusual for someone that conservative.