Why EZchip (EZCH) Stock Is Up Today

NEW YORK (TheStreet) -- EZchip (EZCH) was gaining 9% to $26.05 Wednesday after beating analysts' estimates for earnings and revenue in a record first quarter.

For the first quarter EZchip reported earnings of 33 cents a share, beating the Capital IQ Consensus Estimate of 32 cents a share by 1 cent. Revenue grew 32.7% from the year-ago quarter to $20.3 million. Analysts expected revenue of $20 million for the quarter.

"This has been a record quarter for EZchip in revenues, up 33% compared to the first quarter last year," EZchip CEO Eli Fruchter said in a press release. "During the quarter we continued the testing of the NP-5 and expect the NP-5 to move to production in the second half of the year, in line with the typical three year gap we have seen between NP generations, starting with the NP-1 in 2002. Our upcoming NPS will double the throughput of its NP-5 predecessor and is expected to arrive sooner than the typical three year gap we have had with previous chip generations."

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TheStreet Ratings team rates EZCHIP SEMICONDUCTOR LTD as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate EZCHIP SEMICONDUCTOR LTD (EZCH) 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 robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year."

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

  • The revenue growth came in higher than the industry average of 4.1%. Since the same quarter one year prior, revenues rose by 32.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • EZCH 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 18.44, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for EZCHIP SEMICONDUCTOR LTD is currently very high, coming in at 82.49%. Regardless of EZCH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EZCH's net profit margin of 32.40% significantly outperformed against the industry.
  • 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. When compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, EZCHIP SEMICONDUCTOR LTD's return on equity is below that of both the industry average and the S&P 500.
  • EZCH has underperformed the S&P 500 Index, declining 13.52% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • You can view the full analysis from the report here: EZCH 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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