Shares in five-star Small-Cap Star Lattice Semiconductor (LSCC) spiked over 13 percent on Friday in their first day of trading after a strong earnings report was released after market close on Thursday. The move came on heavy volume, clearing 7 million shares, over six times the average.
LSCC Gains Driven by Expansion into Important Consumer Market
Lattice Semiconductor designs, builds, and markets programmable logic products and their related software, working in both the field programmable gate array (FPGA) and programmable logic device (PLD) segments.
Friday’s results showed strong growth in revenue, particularly in the FPGA market.
"We executed to our strategy in 2013 and created a new, fast growth market for our innovative, low power, low cost FPGAs,” said CEO Darin G. Billerbeck. “The result was the expanded use of our FPGAs in the consumer market where we achieved a 180% increase in revenue compared to 2012. We are also pleased to have grown revenue from our new products by 145% for the fiscal 2013 over the fiscal 2012. We diversified our customer base, while we continued to create compelling and defendable solutions in our traditional markets."
LSCC Earnings Impress the Street
Revenue in Q4 of 2013 was $89.5 million, a 35.9 percent year-over-year gain from Q4 2012’s $65.9 million. Year-over-year earnings swung from a $0.06 a share loss in 2012 to $0.06 a share in 2013, and full-year revenue was up 19.1 percent to $332.5 million.
"Fourth quarter of 2013 revenue exceeded our earlier expectations, coming in 8% above the high-end of our guidance,” said CFO and Corporate Vice President Joe Bedewi. “Sustained product cost reductions contributed to an improved fourth quarter 2013 gross margin of 54.3%. Our strong results led to increased variable compensation, which affected our fourth quarter operating expenses. … Operating cash flow was $56.5 million for fiscal 2013 compared to $4.3 million for fiscal 2012. We ended 2013 with a debt-free balance sheet and approximately $216 million in cash, cash equivalents and short-term marketable securities."
Growing LSCC Shows Signs of Strength
Garnering a five-star rating from Equities.com’s Small-Cap Stars system, Lattice Semiconductor has lived up to expectations in 2013 and early in 2014 with shares up over 45 percent in the last year. And a look at the data contained in an Equities.com EVA Report makes it easy to understand why.
Lattice has consistently shown strong gross margins hovering in the 53 to 55 percent range, but over the last four quarters the company swung into profit, consistently improving net margins each quarter from a -10.89 percent in Q4 of 2012 to a 10.15 percent rate in Q3 of 2013 with consistent revenue growth on a quarterly basis over that same period.
And a look at a DuPont Report on the company sheds even more light on its success. DuPont Analysis, which involves splitting return on equity (ROE) up into three separate components, indicates that Lattice Semiconductor is ahead of its industry competitors in the right ways.
Lattice is behind industry average in both its rate of asset turnover and its equity multiplier (or leverage), but it has maintained those levels and the gap has increased only marginally since 2011. Lattice is significantly better than industry average in terms of its net margin, though, a metric where beating the competition is typically a very good sign. As such, Lattice’s strong ROE is drawn from its strong margins, making it a good sign for the company’s future earnings potential.
And, if one looks back to 2011, both ROE and net income have shown improvement over time, indicating that the company’s currently on a trajectory that, should it continue into the future, would most likely mean continued earnings growth and increasing share value.