Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Mirror Mirror on the Wall, Is Skyworks Solutions Inc (SWKS) the Perfect Stock? – RF Micro Devices, Inc. (RFMD), TriQuint Semiconductor (TQNT)

If investors had a magic mirror that could give them the answer to the question “which stock is the perfect stock?”, then investing would have been a piece of cake. But, in the Wall Street world it does not work like that. It takes time and effort to find a stock that is worth your money.

In my quest for a compelling investment opportunity, I stumbled upon Skyworks Solutions Inc (NASDAQ:SWKS), a mid-sized innovator of high performance analog and mixed signals semiconductors, and, according to the Motley Fool, one of America’s best companies.

In order to decide whether it rightly deserves a spot in my portfolio, I thought I’d check how the company performs based on a few key factors. To spice it up a bit, I did the same for two of its direct competitors, RF Micro Devices, Inc. (NASDAQ:RFMD), and TriQuint Semiconductor (NASDAQ:TQNT).

Key factors

1.Top-line growth: For a business, revenue is the fuel that keeps the engine running. Without sturdy sales performance growing the bottom line would be nothing more than wishful thinking.

2. Financial condition: The balance sheet gives you a glimpse of a company’s financial condition. A current ratio of above 2 means that it can pay its bills and has some extra cash left to make new investments; a debt-to-equity ratio lower than 1 means that the business is positively geared, and shareholders do not have to worry about the destructive implications of debt.

3. Margins: Margins reflect a company’s ability to generate profits. Its product and service portfolio might be a real money-spinner, but if it cannot convert sales into profits, then what’s the point?

4. Management effectiveness: Return on equity tests how effectively a company balances profitability, asset management, and financial leverage. In other words, it gauges management’s ability to enhance the company’s value using investment funds.

5.Valuation: Nobody wants to pay through the nose even for the best companies. Stocks with valuation metrics that could indicate a possible value opportunity hold a special place in investors’ hearts.


Source: Finviz and Ycharts

Compared to the other two, Skyworks Solutions Inc (NASDAQ:SWKS) seems to win all the marbles. It failed to reach the net profit margin and ROE benchmark by a hairbreadth, but, overall, it is a stock worth owning. Skyworks’s rich and, at the same time, diversified customer base, which includes clients like Google Inc (NASDAQ:GOOG)Apple Inc. (NASDAQ:AAPL), and Cisco Systems, Inc. (NASDAQ:CSCO), indicates a relatively stable revenue stream. Its clean as a whistle balance sheet provides it with flexibility in addressing any kind of market turbulence without sacrificing shareholders’ value.

Over the past five years, longtime Skyworks Solutions Inc (NASDAQ:SWKS) investors have been rewarded with hefty returns as shown in the chart below:

SWKS data by YCharts

TriQuint Semiconductor(NASDAQ:TQNT) comes in dead last. In the most recent quarter, the radio frequency solutions supplier, beat analysts expectations both on the top and bottom-line front. However, its future looks clouded as it expects a rather gloomy first quarter ahead. TriQuint’s remarkable cash position is not enough to give it an edge over its peers.