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Stock Analyst Update

PMC-Sierra Again Shows Why It's Top Dog

Communication chipmaker would be a compelling pick at a lower price.

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What Happened?
PMC-Sierra (PMCS) reported on Thursday evening profits of $0.31 per share, roughly 20% better than First Call’s consensus estimate of $0.26 per share. Top-line growth of 32% from the previous quarter also exceeded expectations by a wide margin.

What It Means for Investors
While we think the firm deserves a premium valuation, the shares still look too expensive despite being more than 30% below their 52-week high. However, Thursday's results show yet again why we regard the firm as one of the premier producers of communication-specific semiconductors. In fact, investors couldn’t ask for much more: top- and bottom-line growth during the quarter was very robust, and margins were stellar relative to almost all other chipmakers. Also very encouraging were the growth numbers posted by the recently purchased Quantum Effect Devices, which increased its sales by 48% sequentially over the prior quarter.

Jeremy Lopez does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.