You’ll Want This In Your Home!

Discretionary spending is down in U.S. households, but that hasn’t slowed the stream of technological advancements in the home entertainment industry.  I know the next television I buy will be one of those swanky Wi-Fi capable boxes.

Chances are you or your kids have a tablet, a Wi-Fi enabled smartphone, or even a fridge with Wi-Fi capabilities.  Wi-Fi networks are becoming more prevalent, so entertainment and appliance manufacturers are adopting the interconnectivity we all crave.

We’ve found one company capitalizing on this shifting demand for technology.  Take a look at…


QUICK FACTS

Ticker                                       ENTR

Industry                                    Semiconductors

Recent Price                             $8.41

Market Cap                               $720 m

Shares Outstanding                   85.7 m

Average Volume                        925,390

Dividend Yield                            N/A

Website                                    http://www.entropic.com/

 

COMPANY DESCRIPTION

Entropic Communications (ENTR) is a fabless semiconductor company.  Fabless means that they haven’t spent billions of dollars building out an expensive semiconductor manufacturing facility.  Instead, Entropic focuses on designing, developing, and marketing their semiconductors used in home entertainment solutions.

The company specializes in reinvigorating the home network infrastructure.  They have pioneered ways to make the old coax cable in your house to do amazing new things… all thanks to their advanced technology.

Despite the high levels of network demand brought on by HD and other appliances, the old network infrastructure still works.  Consider this – when you bought your fancy new HD television, you didn’t rip down the walls and install new cables.  We have companies like Entropic to thank for that.

Entropic is also one of the founding members of the Multimedia over Coax Alliance (MoCA).  It’s a global consortium setting standards for multimedia over coaxial cable.

 

FINANCIALS

Entropic has seen some really nice growth over the past year.

Revenue for the first quarter last year was a little over $37 million… This year’s Q1 revenue was $71 million.  That’s more than a 90% increase.  Best of all, the company hosts a gross profit margin over 55%.  And their net income is surging.

Entropic’s first quarter income jumped from almost $2 million in 2010 to over $11.8 million this year.

This drove their Earnings Per Share (EPS) to over $0.14!

Why the dramatic growth?

Management credits increased demand of the home networking products for their jaw dropping improvements.  Not really surprising, since Entropic has been consistently building on their past success.

For example, their revenue increased from $116 million in 2009 to $210 million in 2010.

The bottom line is Entropic looks to be an industry leader in an emerging high growth market.

 

KEY METRICS ANALYSIS

Trailing P/E                                       9.3x

Price / Sales                                     2.9x

Return on Assets                              16.5%

Insider ownership                               7.0%

Short Ratio                                       15.5x

Current Ratio                                     11.1x

Total Debt To Equity                            N/A

 

RECENT EVENTS

As we all know prices for modern technologies change rapidly.  Successful companies charge a premium for their cutting edge technology…

But they need to consistently innovate.

Consider their recent announcement of a new product.  ENTR partnered with channel master to provide two new internet-to-TV adapters.  The devices use Entropic’s technology to connect TVs and internet devices to an in home router!  Talk about great technology!

The company also announced August 3rd as their conference call date to discuss second quarter results.

 

MANAGEMENT TEAM

Patrick Henry – President and CEO

David Lyle – CFO

Dr. Tom Lookabaugh – Chief Technology Officer

 

STOCK ANALYSIS

 

 

 

 

 

 

 

Chart courtesy of stockcharts.com

 

Entropic has been trending lower since the beginning of the year, despite their strong financials.  That being said the stock is trading above the 50-day moving average and it’s pretty close to crossing above the 200-day as well.

ENTR’s 52-week low was $6.29 and the 52-week high was $13.96.  Right now the stock is trading at $8.41.  The 50-day moving average is near $8.38 a share and the 200-day moving average is at $9.36.  The company has a market cap of $720 million and 85.7 million shares outstanding.

 

 

Click HERE to read our report on Silicon Image (SIMG)

Click HERE to read more about API Technologies (ATNY)

 

 

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All stock prices, charts, and figures updated as of July 11 2011.