Why Himax Technologies (HIMX) is Popping Today

NEW YORK (TheStreet) -- Himax Technologies (HIMX) rallied during Monday's session after investment firm Northland Capital pegged it as its top pick for 2014. Northland also bumped its price target to $15 from $12 on the view the Google (GOOG) Glass components-maker will reap higher revenues on increased demand for liquid crystal on silicon (LCOS) micro-displays.

By late afternoon, the stock had added 8% to $11.83. Shares hit their stride over 2013, adding 408.2% in value since January, compared to Merrill Lynch Semiconductors (SMH) ETF's gains of 36.32%.

HIMX Chart HIMX data by YCharts

TheStreet Ratings team rates Himax Technologies Inc as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate Himax Technologies Inc (HIMX) a BUY. This is driven by a few notable 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 revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 10%. Since the same quarter one year prior, revenues slightly increased by 1.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Although Himax Technologies Inc's debt-to-equity ratio of 0.27 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.42, which illustrates the ability to avoid short-term cash problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, Himax Technologies Inc's return on equity exceeds that of both the industry average and the S&P 500.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 368.37% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HIMX should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Himax Technologies Inc has improved earnings per share by 16.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, Himax Technologies Inc increased its bottom line by earning 30 cents a share vs. 6 cents a share in the prior year. This year, the market expects an improvement in earnings (35 cents vs. 30 cents).
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