Why Himax Technologies (HIMX) Is Tumbling Today

NEW YORK (TheStreet) -- Himax Technologies (HIMX) is plummeting on Tuesday after being downgraded by Bank of America/Merrill Lynch.

By late morning, shares had taken off 15.4% to $11.32. Trading volume of 12.5 million was nearly double its three-month daily average.

The firm gave the liquid crystal on silicon (LCoS) display maker a two-notch downgrade to "underperform" from "buy" with a $12.50 price target.

Bank of America analysts said Himax is competing in a highly competitive market and so margin expansion will be difficult without significantly increasing LCoS microdisplay production volume.

The company lowered its fiscal 2014 earnings estimate 60 cents a share and fiscal 2015 to 89 cents a share.

Analysts surveyed by Thomson Reuters forecast 2014 net income of 61 cents a share and 2015 net income of 88 cents a share.

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TheStreet Ratings team rates HIMAX TECHNOLOGIES INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate HIMAX TECHNOLOGIES INC (HIMX) a BUY. This is driven by some important positives, 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 growth in earnings per share, revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

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

  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.2%. Since the same quarter one year prior, revenues slightly increased by 2.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Although HIMX's debt-to-equity ratio of 0.23 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 1.44, which illustrates the ability to avoid short-term cash problems.
  • HIMAX TECHNOLOGIES INC has improved earnings per share by 12.5% 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 $0.35 versus $0.30 in the prior year. This year, the market expects an improvement in earnings ($0.61 versus $0.35).
  • 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 242.89% over the past year, a rise that has exceeded that of the S&P 500 Index. 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.
  • 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 on the basis of return on equity, HIMAX TECHNOLOGIES INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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