Aggressive Growth: Integrated Silicon Solution (ISSI)

Integrated Silicon Solution (ISSI) continues to trade at a deep discount despite reporting a company record for revenue.

Company Description

ISSI is a circuit maker for consumer electronics, network devices, mobile communications, automotive and industrial applications. The Silicon Valley company has operations world wide.

Record-Setting Revenue

On Jul 27 ISSI reported third-quarter results that included a company record of $71.2 million in revenue. The top line grew 25% since the same period last year.

Net income more than doubled to $16 million for the period. Earnings broke down to 57 cents per share, up from 27 cents a year ago. Analysts were expecting 46 cents giving ISSI its seventh consecutive earnings surprises.

Optimistic Outlook

ISSI provided guidance and commented on their backlog, which is the largest they have seen in years, causing analysts to raise their estimates.

On the news the full-year estimate for fiscal 2010 jumped 9 cents to $1.56. Next year’s forecasts are averaging $1.75, up 29 cents. This should be quite a turnaround after losing 22 cents last year.

Valuations

After investors sold on the news and analysts raised estimates, shares of ISSI are trading at a steep discount. The forward P/E is less than 6 times and the PEG is coming in near 0.5.

Industry Comparison

ISSI currently has a net profit margin of just over 15%, beating its peers by more than 300 bps. The company is returning over 25% on its equity, more than double the rate of the industry.

ISSI is the top ranked company of the 66 in the industry, an industry that ranks in the top quarter of all industries on Zacks.com.

The Chart

The Zacks Consensus Estimate for ISSI is at the highest level in at least 5 years, but shares have been selling off recently. Once gun-shy investors return to ISSI we should see a nice upward climb to get shares back in line with the estimates.

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