Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Diodes (Nasdaq: DIOD ) , a supplier of application-specific standard products to the semiconductor industry, dipped as much as 12% following a disappointing third-quarter earnings report from the company.
So what: For the quarter, Diodes reported a modest 4% rise in revenue to $166.6 million and an adjusted profit of $0.20, which was an improvement over the $0.14 reported in the year-ago period. Diodes attributed its modest revenue gains to strength in Asia and market share gains. Those gains, however, weren't enough to save Diodes from falling $0.01 short of the $0.21 in EPS Wall Street had been expecting the company to report. Diodes' fourth-quarter revenue forecast of $160 million to $167 million also fell in line with the $165.7 million the Street is currently projecting. Following the results, Needham downgraded Diodes to hold from buy.
Now what: This wasn't a particularly strong quarter for Diodes, but it wasn't the poor quarter that today's drop would make it out to be, either. We're currently on the downswing in our latest semiconductor cycle, yet Diodes is one of the few companies that continue to remain healthfully profitable. At just 11 times forward earnings, with $124 million in net cash, and now trading for less than book value, today's drop might merit a closer look at what I feel is a long-term winner.
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