Aggressive Growth: Spreadtrum Communications

Spreadtrum Communications (SPRD) keeps setting multi-year highs thanks to continuously rising earnings estimates.

But, it is not too late to get into this Zacks #1 Rank (Strong Buy) thanks to valuations that are still showing a good value on those growth rates.

Company Description

Spreadtrum Communications is a fabless semiconductor company that makes products for the wireless communication markets. Fabless means that the company does not actually fabricate the products, but designs and sells them.

Revenue Soaring

On Nov 17 Spreadtrum announced third-quarter results that included a 35% sequential increase in revenue. The $96.2 million top line was up 151% since last year and just above the company’s high end of expectations.

Gross profit almost tripled since last year, to $42.5 million. This led to earnings per share of 37 cents, which was 3 cents higher than the Zacks Consensus Estimate.

Net income and revenue were both company records.

Estimates Still Coming in Higher

Since the earnings release the full year consensus estimate for 2010 is up 17 cents, with the latest round of upward revisions coming in the past week. Next year’s forecasts average $1.55, up 20 cents on the news and another 8 cents in the past week.

Given the 43-cent loss last year, analysts are expecting quite a turnaround by year’s end. Of course most of that has already taken place, but forecasts are calling for another 23% growth in 2011.

Valuations

Probably paying through the nose for growth rates like that. Nope. Shares of SPRD are going for less than 15 times forward estimates and with a PEG of just 0.6. Not bad at all.

The Chart

Shares just keep setting multi-year highs. I would not be surprised if this continues into 2011. Given those valuations and earnings estimate momentum, this chart could continue for a some time.

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