1. A long-term debt-to-equity ratio of less than 0.5
2. A three-year-average revenue growth rate greater than 10%
3. A mid-capitalization market value (between $1 billion and $10 billion)
4. A three-year-average EPS growth rate greater than 10%
5. A price-to-earnings multiple that is < 20.0
Here’s an overview of the key aspects shared by all stocks in this group:
| Symbol | Company Name | LT Debt-to-Equity Ratio | Rev. Growth Rate (last 3 Yrs) | Market Capitalization | EPS Growth Rate (last 3 Yrs) | Price-to-Earnings (TTM) |
|---|---|---|---|---|---|---|
| CRUS | Cirrus Logic | 0 | 39.89 | $1.27 B | 15.79 | 9.1 |
| IPGP | IPG Photonics | 0.02 | 31.87 | $3.01 B | 61.54 | 20 |
| KLAC | KLA-Tencor | 0.22 | 14.29 | $9.68 B | 32.7 | 18.2 |
| SWKS | Skyworks Solutions | 0 | 16.84 | $4.55 B | 15.17 | 18.5 |
A discussion of each company’s respective statistics should help determine the one best suited for your portfolio.
Trends are positive for this audio/energy-entrenched chip maker
Cirrus Logic, Inc. (NASDAQ:CRUS), a producer of analog and mixed-signal integrated circuits, is focused primarily on consumer end-markets. These include audio, automotive entertainment, and portable devices like smartphones, tablets, as well as computers. Audio products contributed 93% of total revenue in 2012.
The company also operates a modestly sized energy-products division that caters to energy control, energy measurement, LED lighting, and energy-exploration applications. One example of its products’ use is in digital utility meters.
A more-than-doubling of audio-products revenue in fiscal 2013 (ended March 31) served to lift Cirrus Logic, Inc. (NASDAQ:CRUS)’ three-year average revenue growth rate to 40%. Launches of new offerings targeted at portable audio markets assisted the massive upturn. Resulting share-earnings growth was nearly 16% on an annual basis.
Cirrus Logic, Inc. (NASDAQ:CRUS)’ largest customer is none other than Apple, from which 82% of total revenue was derived in 2013. Management believes it can boost operating income at a 20% annual clip and revenue 15% per year over the long term.
In light of the stock’s reduced P/E ratio (trailing-12 months) of 9.1 and its clean balance sheet with no debt, Cirrus Logic, Inc. (NASDAQ:CRUS) shares offer an upside opportunity.
A booming laser technologies market
The second company that passed the screen was IPG Photonics Corporation (NASDAQ:IPGP), a maker of high-performance lasers and related products that are predominantly used for materials processing. Indeed, 87% of sales were in the materials market last year, particularly to general manufacturing, automotive, heavy industry, aerospace, consumer, and semiconductor/electronics customers. Another 8% was utilized for “advanced applications,” while 4% of sales were for communications purposes, and 1% was medical-related.
IPG Photonics Corporation (NASDAQ:IPGP)’s 32% revenue growth and 32% EPS growth rate jump off the page and the momentum, driven by the capturing of share in the materials market, remains positive. In fact, revenue and EPS climbed 22% and 11%, respectively, in the June period.
The company’s investments in R&D are bearing fruit, as its developments are often being incorporated in manufacturing processes as replacements for traditional materials. I liken the company to DuPont, a major Dow-30 component, due to that focus.
The company’s shares, at a trailing P/E of 20.0, have been erratic. The shares may well gain positive headway, given favorable earnings prospects in the near term.
Semiconductor market supplier’s rapid earnings upturn to resume
The third screen result was KLA-Tencor Corporation (NASDAQ:KLAC), a producer of process-control and yield-management solutions for the semi and nano-electronics industries. In fiscal 2013, 79% of revenue was derived from product sales, and the remaining 21% was contributed by services, mainly yield management.
In terms of the screen, KLA-Tencor Corporation (NASDAQ:KLAC) is notable for its 33% annual EPS growth rate. These gains seem to have been fueled by robust increases across numerous geographies, particularly the U.S. and Korea, as well as lesser-served end markets, such as metrology. On that note, defect inspection is the application for the company’s key products.
The semiconductor market is highlighted by steady upturns in demand with occasional blips due to inventory gluts or other reasons. That said, KLA-Tencor Corporation (NASDAQ:KLAC)’s results are set to bounce back strongly in the December quarter, and remain mostly higher over the subsequent year.
Its shares are at a trailing P/E of 18.2 after rising much of this year. There should be further positive gains in the cards if conditions hold.
Well situated in portable- and smart-energy sectors
I had recently mentioned Skyworks Solutions Inc (NASDAQ:SWKS) in a blog entitled “3 Semiconductor Stocks for You to Consider.” The semiconductor maker is firmly positioned in high-growth markets, namely smartphones, tablets, automotive, smart energy, and wireless networking. Last fiscal year, ended in September, 92% of sales were to the Asia-Pacific region, another 6% were to the Americas, and 2% were to Europe.
The screen points out Skyworks Solutions Inc (NASDAQ:SWKS)’ revenue and earnings growth rates, having averaged in the mid-teen percentages. Digging further into the numbers, gross margins are expanding and were 44% in the latest quarter. That measure is apt to remain on the upturn as the company builds its line of offerings. It is spending 10% to 15% of sales on research and development and ought to remain vital within the aforementioned growing end markets.
Skyworks Solutions Inc (NASDAQ:SWKS) shares, at a trailing P/E of 18.5, are a good selection for growth investors.
Summing it up
The screen revealed several companies that are not the most well known amongst their peers, but may well be gaining market share in their key business segments. Mobile, whether it be through Apple (Cirrus Logic, Inc. (NASDAQ:CRUS)’ biggest client by far), Samsung (one of KLA-Tencor Corporation (NASDAQ:KLAC) and Skyworks’ biggest clients), or another manufacturer, should drive earnings trends in the near term. More specifically, mobile Internet and audio applications, for instance, may provide growth avenues.
The article The 4 Best Electronics Stocks for Your Money originally appeared on Fool.com and is written by Damon Churchwell.
Damon Churchwell has no position in any stocks mentioned. The Motley Fool recommends IPG Photonics. The Motley Fool owns shares of Cirrus Logic and IPG Photonics. Damon is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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