Synaptics, Inc. (NASDAQ:SYNA)

CAPS Rating: 4 out of 5

The Company is a developer and supplier of custom-designed user interface solutions that enable people to interact more easily and intuitively with mobile computing, entertainment and other electronic devices.

Recs

2
Player Avatar MashkiaTsair (< 20) Submitted: 9/17/2010 7:33:31 PM : Outperform Start Price: $27.04 SYNA Score: +64.76

-Synaptics, Incorporated (Public, NASDAQ:SYNA)
Analysis 5G. (4.9.2010.)
Stability: ***** (Ultra-stable)
Auditor: KPMG

NOTE: I use my own five star stability rating system, because I don't trust world's rating agencies for my investments. A five star rating means that company is Ultra-stable in my eye, and I would buy a corporate bond from this company at par.

recommended by Michael Robinson from American Wealth Underground, May, 2010.

3-year growth per share:
rev.growth = 30% y/y for last 3 years. Earn.growth = 40% y/y, FCF grew at 80% y/y !!! (per share)
7-year growth per share:
rev.growth = 20% y/y for last 7 years. Earn.growth = 25% y/y, FCF grew at 32% y/y !!! (per share)

P/E=17.5
P/FCF=8.7
P/Sales=1.8
P/B=3.2

Based on P/E, the company's stock *looks* expensive, but this is not so, due to high FCF.
The company is constantly improving upon it's operations, yet the stock price isn't moving anywhere.

The stock is priced above *value* criteria defined by Ben Graham, but I can make a speculative move.
The P/B ratio is a bit high.

If the company's shares fall by 40-50%, I will consider increasing stake.

Good points:
1. Management: buys back shares/stock repurchases
2. Strong competitive moats.
3. China-proof. (they do only R&D, while manufacturing is outsourced.)
4. FCF-on-Assets Ratio (FCFoA) is 25% ! and FCFoE = 40% !
Those parameters are beaten only by few companies such as U.S. "ITT Education" and
Israeli "Roshtov".
5. strong balance sheet
6. good growth

Bad points:
1. Stock Not cheap.
This stock price at $26/share fails Ben Graham's definition of value.

My opinion:
The tablet market is promising. It could be an interesting long-shot speculation.
Stock is not cheap, but reasonably priced.
However this price can be dustified by it's free cash flow.
Basically the company understates own earnings. But FCF shows the truth here.

Verdict: Due to stock price, it does not qualify as an investment, but could be bought in small quantity on speculative basis at $30/share.

3rd party Analysis: Touchscreen chipmakers tap tablet boom
http://www.reuters.com/article/idUSTRE6884HQ20100909

The author, Michael Robinson, thinks it is cheap, and from growth investor standpoint, it really is, but from a value investor's standpoint, such as Graham, it simply isn't.
The author compares this to industrial average, which is absolutely wrong, as the dot.com crash proves. It must be compared to investor's own logic, not to industry average.

-MashkiaTsair, al4321@gmail.com

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