Yesterday, Cree, Inc. (NASAQ:CREE) discussed its Q4 2013 results. CEO, Charles M. Swoboda said that Cree, Inc. (NASAQ:CREE) was “in a great position to take advantage of the global shift to LED lighting.” Ludo Carnotensis, a former CEO at Koninklijke Philips NV (ADR) (NYSE:PHG) has previously called Cree “a disruptive force” because the company recently released an LED light bulb for less than $10 and was able to beat out Philips for shelf space at The Home Depot, Inc. (NYSE:HD). Based on Cree, Inc. (NASAQ:CREE)’s preliminary financial results we analyze the company relative to its peers (see the end of this post for the peer set).
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Our analysis is based on the company’s performance over the last twelve months (unless stated otherwise). The table below shows the preliminary results along with the recent trend for revenues, net income and returns.
|Annual (USD million)||2013-06-30||2012-06-30||2011-06-30||2010-06-30||2009-06-30|
|Revenue Growth %||19.0||17.9||13.9||52.9||15.0|
|Net Income Growth %||95.7||(69.7)||(3.8)||396.9||(3.7)|
|Net Margin %||6.3||3.8||14.8||17.6||5.4|
Cree, Inc. (NASAQ:CREE) currently trades at a higher Price/Book ratio (3.2) than its peer median (1.8). The market expects more growth from Cree than the median of its chosen peers (PE of 102.4 compared to peer median of 31.9) and to improve its current ROE of 3.2% which is around peer median.
The company’s relatively high profit margins (currently 6.3% vs. peer median of 5.0%) are burdened by asset inefficiency with asset turns of 0.5x compared to the peer median of 0.6x. Overall, this suggests a margin driven operating model relative to its peers. Cree’s net margin has increased 2.5 percentage points from last year’s low but is still below its five-year average net margin of 9.6.
Superior Growth Prospects
Betting Heavily on the Future
Cree, Inc.’s analysis versus peers uses the following peer-set: SK Hynix Inc. (000660-KR), Mediatek Inc. (2454-TW), Micron Technology, Inc. (NASDAQ:MU), Broadcom Corporation (NASDAQ:BRCM) Class A, Analog Devices, Inc. (NASDAQ:ADI), ON Semiconductor Corp (NASDAQ:ONNN), TriQuint Semiconductor (NASDAQ:TQNT), II-VI, Inc. (NASDAQ:IIVI), Diodes Incorporated (NASDAQ:DIOD) and IXYS Corporation (NASDAQ:IXYS).