MagnaChip Semiconductor – Value

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MagnaChip Semiconductor Corp. (MX) topped earnings estimates by an impressive 120% in its third quarter, which was also the sixth straight quarter with a positive surprise. Following the report, this provider of analog and mixed-signal semiconductor products enjoyed raised earnings estimate revisions that helped it become a Zacks #1 Rank (Strong Buy). Moreover, MagnaChip has a forward price-to-earnings (P/E) multiple of just 6.2, which makes it attractive for value investors.

MagnaChip Crushes Q3 EPS Estimate

On November 1, MagnaChip reported third quarter earnings of $1.39, soaring past the Zacks Consensus Estimate of 76 cents. Revenue growth of 10.7% was impressive and in line with the Zacks Consensus Estimate of $222.0 million.

The year-over-year upside in revenue was primarily driven by strong performances from Manufacturing Services (up 45% year over year) and Power Solutions (up 28.4%), which fully offset a weak result from Display Solutions (down 24.4%).

Gross margin expanded 450 basis points year-over-year to 34.5%, reflecting a favorable business mix and productivity improvements.

For the fourth quarter, revenue is expected to between $213.0 million and $222.0 million with gross margin of 33.5%– 34.5%.

Earnings Estimates Moving Up

The Zacks Consensus Estimate for 2012 has jumped 20.6% to $2.17 per share over the last 60 days, representing year-over-year growth of 33.6%. The Zacks Consensus Estimate for 2013 advanced 18.9% to $2.33 in the same time, reflecting a year-over-year increase of 7.4%.

Impressive Valuation

In addition to a low P/E, the stock looks attractive with respect to a price-sales (P/S) multiple of just 0.6. A P/E below 15.0 and a P/S ratio less than 1.0 generally suggest a value stock.

Moreover, MagnaChip’s Return on Equity (ROE) of 48.2%, Return on Investment (ROI) of 22.6% and Return on Asset (ROA) of 13.3% are all better than the industry averages.

Seoul, South Korea-based MagnaChip Semiconductor Corp. designs and manufactures analog and mixed-signal semiconductor products. Its customers include consumer electronics original equipment manufacturers (OEMs) such as LG Display, subsystem designers, contract manufacturers, and analog and mixed-signal semiconductor companies. The company primarily sells its products through a direct sales force and a network of agents and distributors all over Korea, Japan, Greater China and Europe. The company has a market cap of $499.84 million and faces significant competition from Analog Devices (ADI).


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