NEW YORK (TheStreet) -- Shares of Silicon Image Inc. (SIMG) are falling by 26.41% to $4.96 on heavy volume in mid-morning trading on Thursday, after the company issued a sales warning for fiscal 2015.
The company, which provides connectivity solutions that enable the reliable distribution and presentation of HD content for mobile consumer electronics and personal computer markets, said it's expecting a year-over-year revenue decline of approximately 10%.
Silicon said the drop in revenue is due to "a reduction in mobile design wins at one of its largest customers."
"While we continue to execute on our long term strategic growth initiatives, we remain committed to reduce our operating expenses in 2015 and anticipate that even with a top line revenue decline, we will remain profitable with operating margin as a percent of revenue expected to be flat to slightly up for the year, Silicon CEO Camillo Martino said.
Separately, TheStreet Ratings team rates SILICON IMAGE INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate SILICON IMAGE INC (SIMG) a BUY. This is driven by a few notable 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 growth in earnings per share, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, expanding profit margins and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- SILICON IMAGE INC has improved earnings per share by 18.2% 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. During the past fiscal year, SILICON IMAGE INC turned its bottom line around by earning $0.14 versus -$0.13 in the prior year. This year, the market expects an improvement in earnings ($0.27 versus $0.14).
- SIMG 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 3.66, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has increased to $5.11 million or 13.92% when compared to the same quarter last year. In addition, SILICON IMAGE INC has also modestly surpassed the industry average cash flow growth rate of 11.88%.
- The gross profit margin for SILICON IMAGE INC is rather high; currently it is at 62.95%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 14.64% trails the industry average.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. 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: SIMG Ratings Report