Will This Upgrade Help Microsemi (MSCC) Stock Today?

NEW YORK (TheStreet) -- Microsemi Corp. (MSCC) was upgraded to "buy" from "neutral" at Goldman Sachs (GS) on Monday.

The firm said it raised its rating on the company, which designs, manufactures, and markets analog and mixed signal semiconductor solutions, based on a valuation call, and the company's appealing late cycle exposure.

Goldman raised its price target on Microsemi to $30 from $26.

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TheStreet Ratings team rates MICROSEMI CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate MICROSEMI CORP (MSCC) a BUY. This is driven by multiple 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, expanding profit margins and increase in stock price during the past year. 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:

  • The revenue growth came in higher than the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 22.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • MSCC's debt-to-equity ratio of 0.76 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 MSCC's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.35 is high and demonstrates strong liquidity.
  • MICROSEMI CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MICROSEMI CORP turned its bottom line around by earning $0.48 versus -$0.36 in the prior year. This year, the market expects an improvement in earnings ($2.17 versus $0.48).
  • The gross profit margin for MICROSEMI CORP is rather high; currently it is at 54.78%. Regardless of MSCC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MSCC's net profit margin of -2.35% significantly underperformed when compared to the industry average.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, the stock's 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 the other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: MSCC Ratings Report
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