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. TheStreet Ratings quantitative algorithm evaluates over 4,300 stocks on a daily basis by 32 different data factors and assigns a unique buy, sell, or hold recommendation on each stock. Click here to learn more.
"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 growth in earnings per share, increase in net income and revenue growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."
Must Read: Warren Buffett's 25 Favorite Stocks
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 net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 94.2% when compared to the same quarter one year prior, rising from $0.40 million to $0.77 million.
- 38.49% is the gross profit margin for DSP GROUP INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, DSPG's net profit margin of 2.10% significantly trails the industry average.
- Powered by its strong earnings growth of 50.00% and other important driving factors, this stock has surged by 30.87% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness 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