Why MagnaChip Semiconductor (MX) Hit a One-year Low Today

NEW YORK (TheStreet) -- MagnaChip Semiconductor  (MX) hit a one-year low of $12.50 on Wednesday as numerous law firms started investigations into the company for securities fraud claims.

MagnaChip announced Tuesday that the Audit Committee of the company's Board of Directors determined that MagnaChip incorrectly recognized revenue on some transactions and MagnaChip would restate its financial statements. Numerous law firms subsequently announced investigations into the company.

The law firms include Pomerantz Law Firm, Law Offices of Howard G. Smith, The Law Firm of Wohl & Fruchter LLP, Wites & Kapetan, The Rosen Law Firm, Johnson & Weaver LLP, Block & Leviton LLP, Holzer & Holzer LLC, Girard Gibbs and Levi & Korsinsky LLP.

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TheStreet Ratings team rates MAGNACHIP SEMICONDUCTOR CORP as a "buy" with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate MAGNACHIP SEMICONDUCTOR CORP (MX) a BUY. This is driven by several positive factors, 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 notable return on equity, attractive valuation levels, largely solid financial position with reasonable debt levels by most measures 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:

  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, MAGNACHIP SEMICONDUCTOR CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • MX's debt-to-equity ratio of 0.66 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that MX's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.49 is high and demonstrates strong liquidity.
  • 37.02% is the gross profit margin for MAGNACHIP SEMICONDUCTOR CORP which we consider to be strong. Regardless of MX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MX's net profit margin of 21.42% compares favorably to the industry average.
  • MAGNACHIP SEMICONDUCTOR CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, MAGNACHIP SEMICONDUCTOR CORP increased its bottom line by earning $5.20 versus $0.52 in the prior year. For the next year, the market is expecting a contraction of 55.6% in earnings ($2.31 versus $5.20).
  • You can view the full analysis from the report here: MX Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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