Synaptics, Incorporated (SYNA) is a Winning Pick, but Wait for the Pullback

Valuation

Synaptics appears richly valued when compared directly to Microsoft and HP. Its POP (or “Price of Profitability, also known as a forward P/E) is 25:

Synaptics also has a far smaller market capitalization compared to the companies it relies on for growth in the PC segment. Although Synaptics does not pay a dividend, the company generated a respectable level of earnings (EBITDA). This is not surprising, since Synaptics is in an early- to mid-level phase of growth, while Microsoft and HP are in a mature product phase:

(Data Source: Yahoo! Finance)

Bottom Line

Investors should expect Synaptics shares to drop in the short-term, as investors lock in gains. Despite strong revenue from the tablet and phone space, the focus will return on the importance of the PC segment for profit growth. Synaptics is well-positioned in the computing space. For this reason, growth should be expected to continue. Synaptics expects topline growth of between 6% and 12%. As a leader in the touchscreen space, Synaptics could be expected to be included by more brands. This ensures the company’s growth story is not yet over.

The article Synaptics is a Winning Pick, but Wait for the Pullback originally appeared on Fool.com and is written by Chris Lau.

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