Want To Invest In Silicom Ltd (SILC)? Here’s How It Performed Lately
Understanding how Silicom Ltd (NASDAQ:SILC) is performing as a company requires looking at more than just a years’ earnings. Today I will run you through a basic sense check to gain perspective on how Silicom is doing by comparing its latest earnings with its long-term trend as well as the performance of its communications equipment industry peers. Check out our latest analysis for Silicom
Were SILC’s earnings stronger than its past performances and the industry?
For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This blend allows me to analyze different stocks on a more comparable basis, using the latest information. For Silicom, the latest twelve-month earnings is $16M, which compared to the prior year’s figure, has risen by 21.80%. Given that these values may be relatively nearsighted, I’ve computed an annualized five-year figure for SILC’s net income, which stands at $13M. This means that, on average, Silicom has been able to gradually improve its earnings over the last couple of years as well.
What’s the driver of this growth? Well, let’s take a look at whether it is only attributable to an industry uplift, or if Silicom has seen some company-specific growth. The hike in earnings seems to be driven by a substantial top-line increase beating its growth rate of expenses. Though this brought about a margin contraction, it has made Silicom more profitable. Scanning growth from a sector-level, the US communications equipment industry has been growing its average earnings by double-digit 15.36% in the past twelve months, and 10.83% over the past couple of years. This suggests that whatever tailwind the industry is deriving benefit from, Silicom is able to leverage this to its advantage.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Silicom has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Silicom to get a better picture of the stock by looking at:
1. Financial Health: Is SILC’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
2. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
