NEW YORK (TheStreet) -- Synaptics (SYNA - Get Report) was gaining 12.8% to $75.05 after-hours Tuesday after announcing it will buy the LCD drive IC unit of Renasas and raising its fiscal fourth quarter guidance.
Synaptics will buy the unit in full for $475 million in cash, or an enterprise value of $515 million. Previous reports said the company was only interested in buying Renasas' 55% stake in the business. Synaptics said the purchase can help grow its addressable market by 1.5x and "accelerate its product roadmap for touch-and-display driver integration."
Separate from the purchase Synaptics raised its fiscal fourth quarter guidance to between $300 million and $310 million from the previous $275 million to $295 million due to better-than-expected mobile and PC demand. Analysts expect revenue of $285.8 million for the quarter.
TheStreet Ratings team rates SYNAPTICS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate SYNAPTICS INC (SYNA) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 3.2%. Since the same quarter one year prior, revenues rose by 25.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- SYNA has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.83, which clearly demonstrates the ability to cover short-term cash needs.
- Compared to its closing price of one year ago, SYNA's share price has jumped by 56.95%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- SYNAPTICS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SYNAPTICS INC increased its bottom line by earning $2.87 versus $1.59 in the prior year. This year, the market expects an improvement in earnings ($4.04 versus $2.87).
- 48.19% is the gross profit margin for SYNAPTICS INC which we consider to be strong. Regardless of SYNA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SYNA's net profit margin of -19.60% significantly underperformed when compared to the industry average.
- You can view the full analysis from the report here: SYNA Ratings Report