Aggressive Growth Stock: Spreadtrum Communication
Spreadtrum Communications (NASDAQ:SPRD) analysts are growing more and more bullish of SPRD, but the market has not pushed shares higher. At these valuations it is tough to ignore this Zacks #1 Rank (Strong Buy).
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.
Same Price, Better Earnings
I wrote about Spreadtrum back in December. The company was coming off of an earnings surprise and estimates were on the rise. Since then, they have beaten expectations again and estimates are even higher.
The Zacks Consensus Estimate jumped 35 cents to $1.91 for 2011, which is a 41% growth rate. Next year’s average estimate is up 46 cents, to $2.16, for a 13% increase.
While the price has fluctuated, it is just about unchanged from the December feature. That means valuations are even more enticing than before. Shares are trading at just 11 times the forward P/E and, with a long-term growth rate of 25%, a PEG ratio of just 0.4.
Operating Cash Flow has gone through the roof. In 2008 it was negative $19 million, then worked up to a positive $20 million in 2009. By the end of 2010 that number grew more than 8 times, to over $166 million.
They also ended 2010 with over $100 million in cash on hand.
Additionally, SPRD has seen a nice support level develop here. So, with some protection on the down side, a bullish crossover in the MACD and improving earnings, there is no time like the present to scoop up a piece of Spreadtrum.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service
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