OmniVision Technologies, Inc. (OVTI): Is This Stock Destined for Greatness?

Page 1 of 2

Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does OmniVision Technologies, Inc. (NASDAQ:OVTI) fit the bill? Let’s take a look at what its recent results tell us about its potential for future gains.

What we’re looking for
The graphs you’re about to see tell OmniVision Technologies, Inc. (NASDAQ:OVTI)’s story, and we’ll be grading the quality of that story in several ways:

Growth: Are profits, margins, and free cash flow all increasing?

Valuation: Is share price growing in line with earnings per share?

Opportunities: Is return on equity increasing while debt to equity declines?

Dividends: Are dividends consistently growing in a sustainable way?

What the numbers tell you
Now, let’s take a look at OmniVision Technologies, Inc. (NASDAQ:OVTI)’s key statistics:

OVTI Total Return Price Chart

OVTI Total Return Price data by YCharts.

Criteria 3-Year* Change Grade
Revenue growth > 30% 141.2% Pass
Improving profit margin 59.5% Pass
Free cash flow growth > Net income growth (99.6%) vs. 317.3% Fail
Improving EPS 314.7% Pass
Stock growth (+ 15%) < EPS growth (2%) vs. 314.7% Pass

Source: YCharts. *Period begins at end of Q1 2010 (January).

OVTI Return on Equity Chart

OVTI Return on Equity data by YCharts.

Criteria 3-Year* Change Grade
Improving return on equity 239.6% Pass
Declining debt to equity (42.9%) Pass

Source: YCharts. *Period begins at end of Q1 2010 (January).

How we got here and where we’re going
In spite of its share-price weakness, OmniVision Technologies, Inc. (NASDAQ:OVTI) has made nearly all the right moves over the past three years, earning six out of seven possible passing grades in the process. The vastly reduced free cash flow level should be of some concern, but OmniVision Technologies, Inc. (NASDAQ:OVTI) is currently clinging to a barely positive level of free cash flow, and as its debts have declined significantly, this shouldn’t be a major concern. What is of greater concern is whether OmniVision Technologies, Inc. (NASDAQ:OVTI) can make progress in an extremely competitive market. Let’s see how the company might succeed, and what might trip it up.

Let’s start with what’s tripping up OmniVision lately: expectations. The company can’t get by with first-quarter guidance that looks just good enough at best, especially not after blowing Wall Street away so impressively in the holiday quarter. Although OmniVision has diversified away from Apple Inc. (NASDAQ:AAPL), it hasn’t diversified quite enough. OmniVision holds about half of the tablet image sensor market, which lines up very well with Apple Inc. (NASDAQ:AAPL)’s share of the tablet market (estimated at 51% in 2012 and projected to drop to 46% in 2013, according to IDC).

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!