Bull of the Day: Intersil (ISIL)

Intersil Corp (ISIL) recently reported earnings and beat the Zacks Consensus Estimate as well as the Wall Street Consensus Estimate. As a result the stock rallied for just about 7% in the session following the report. The stock is a Zacks Rank #1 (Strong Buy) and today it is the Bull of the Day.

The Numbers

ISIL beat the Zacks Consensus Estimate of $0.10 by $0.07 for a 70% positive earnings surprise. Revenues came in mostly in line with expectations, but the Zacks Research System shows it as a miss of approximately $1M.

ISIL guided to Q1 revenues to a range of $125M -$131M when the consensus was calling for revenue of $127M.

Description

Intersil Corp makes power management and precision analog integrated circuits (ICs). The company offers various power IC solutions for battery management, processor power management, and display power management, including power regulators, converters, and controllers, as well as integrated power modules. Intersil Corporation was founded in 1967 and is headquartered in Milpitas, California.

Earnings History

The recent earnings history for ISIL is rather solid with four of the last seven reports topping the Zacks Consensus Estimate. The last two reports were beats as well, so there is some solid earnings momentum here too.

The recent beat of 70% is one of the bigger beats, as the company has posted positive earnings surprises of between 7% and 25% throughout the last seven quarters.

Estimates

The 2016 Zacks Consensus estimate has been moving higher. The number stood at $0.50 in December of last year and then kicked higher to $0.52 in January. By February, that estimate increased again to $0.55.

The 2017 numbers have little visibility to them at this point. In fact there are only two months worth of estimates, so looking at them moving from $0.63 to $0.64 from January to February doesn't really tell us that much. What we do see from this is that there is implied earnings growth of 17%.

Valuation

ISIL has a mixed valuation. Most investors immediately look to PE to discern value and at 22x forward earnings ISIL doesn't offer much "value" as the stock trades at a premium to the industry average of 15x forward earnings. Value investors also tend to focus on Price to Book, where ISIL trades at 1.7x compared the a 2.2x industry average, so it trades at a discount on that measure. When one looks at price to sales, we see a 3.2x multiple for ISIL and a 2.1x industry average so there is a small premium there too. Now you understand why I labeled this valuation as mixed.

Chart

Zacks has developed a chart that helps investors see how earnings estimates have impacted the price of the stock over the last several years. We call this chart the price and consensus chart, and each color coded lines represents analyst estimates over a designated year. As estimates increase, the stock tends to follow. The Zacks Rank is impacted by earnings estimate increases, beats and incorporates the idea of analyst agreement and magnitude. As a Zacks Rank #1 (Strong Buy) we see that estimates are moving higher.

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Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Stocks Under $10, an investor service , where he recommends the stocks in the portfolio.

Brian also runs the brand new Zacks Game Changers where he looks for stocks that are disrupting their industries and reaping big gains.

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