Value Play: Diodes Inc. (DIOD)

Diodes Inc. (DIOD) has been riding the tech revival to record revenue in 2010. DIOD is also a rare company that has both value but also a high growth rate, with a PEG ratio of just 0.5.

Diodes manufactures application specific standard products within the analog semiconductor markets for customers in the consumer electronics, computing, communications, industrial and automotive markets.

Headquartered in Dallas, the company has design, marketing and manufacturing facilities worldwide, including in China, England and Germany.

Record Revenue in the Second Quarter

Diodes is riding the return of the semiconductor sector. On Aug 5, the company reported second quarter results which saw revenue rise 43.6% to a record $103.9 million compared to last year.

It was also a sequential increase of 9.1% over the first quarter of 2010.

Demand was strong for products in all of the company’s worldwide markets, with North America and Asia leading the charge.

Even Europe showed sustained improvement and reported record revenue despite a slowing European economy due to austerity measures.

Given that 2009 was challenging on many fronts, it’s not surprising that earnings per share easily beat the year ago period at 41 cents compared to just 6 cents. This also beat the Zacks Consensus which was looking for 38 cents.

Can The Growth Continue?

Diodes is very bullish and expects record revenue to continue into the third quarter.

It is anticipating revenue in the range of $158 million to $164 million, an increase of 6% to 10% from the second quarter.

Gross profit is also expected to increase and will also be another record quarter.

Zacks Consensus Estimates for 2011 Reflect Economic Uncertainty

While there is no doubt that 2010 is a much better year than 2009, analysts appear to be uncertain the party can continue into 2011.

2010 earnings growth is expected to be 375% whereas 2011’s earnings growth is forecast at just 3.5%.

8 estimates moved higher on the 2010 Zacks Consensus in the last month, pushing the full year consensus to $1.66 from $1.52.

2011 estimates are also higher, but the company is only expected to earn $1.72 per share. Clearly analysts feel that demand will be slowing next year.

Value Fundamentals

Despite the unknowns of 2011, Diodes has some attractive value fundamentals. The company is trading cheaper than its industry, at just 9.2x forward estimates compared to 13.5x for the industry.

It not only has a single digit forward P/E but its price-to-book ratio of 1.4 is under the industry average of 1.9.

Additionally, the company has a solid return on equity (ROE) of 12.5% whereas the industry is at just 9.5%.

Diodes is a Zacks #1 Rank (strong buy) stock.

DIODES INC (DIOD): Free Stock Analysis Report

About Tracey Ryniec 60 Articles

Affiliation: Zacks Investment Research

Tracey Ryniec is the Value Stock Strategist for She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at

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