Why Cirrus Logic (CRUS) Stock Is Surging Today

NEW YORK (TheStreet) -- Shares of Cirrus Logic Inc. (CRUS) are surging, up 7.06% to $23.57, after the developer of analog and mixed-signal integrated circuits announced it agreed to pay $467 million for U.K.-based Wolfson Microelectronics.

The company said it would finance the purchase through cash and $225 million in debt funding. 

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TheStreet Ratings team rates CIRRUS LOGIC INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate CIRRUS LOGIC INC (CRUS) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and feeble growth in the company's earnings per share."

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

  • CRUS 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 4.34, which clearly demonstrates the ability to cover short-term cash needs.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • CIRRUS LOGIC INC's earnings per share declined by 48.7% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CIRRUS LOGIC INC reported lower earnings of $1.64 versus $1.99 in the prior year. This year, the market expects an improvement in earnings ($1.70 versus $1.64).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 52.2% when compared to the same quarter one year ago, falling from $26.36 million to $12.60 million.
  • You can view the full analysis from the report here: CRUS Ratings Report
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