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"We rate DSP GROUP INC (DSPG) 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 impressive record of earnings per share growth, compelling growth in net income and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that revenues have generally been declining."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- DSP GROUP INC reported significant earnings per share improvement 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. This trend suggests that the performance of the business is improving. During the past fiscal year, DSP GROUP INC turned its bottom line around by earning $0.12 versus -$0.36 in the prior year. This year, the market expects an improvement in earnings ($0.19 versus $0.12).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Semiconductors & Semiconductor Equipment industry average. The net income increased by 45.1% when compared to the same quarter one year prior, rising from $0.75 million to $1.09 million.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- DSPG, with its decline in revenue, underperformed when compared the industry average of 10.3%. Since the same quarter one year prior, revenues fell by 10.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- 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, DSP GROUP INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: DSPG Ratings Report
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