Why Monolithic Power Systems Shares Popped

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 Monolithic Power Systems (NASDAQ: MPWR  ) rose more than 17% Friday to touch a new 52-week-high after the company reported better-than-expected third-quarter earnings.

So what: Quarterly net revenue rose 15.6% year over year, to $65.3 million, which translated to 22.2% adjusted net income growth, to $0.33 per diluted share. For reference, analysts were looking for adjusted net income of $0.32 per share on sales $65.22 million.

In addition, Monolithic Power stated fourth-quarter revenue is expected to be in the range of $61 million to $65 million (or in line with estimates), with strong gross margin between 53.5% and 54.5%, or an improvement over its already respectable third-quarter gross margin of 53.6%.

Now what: Monolithic Power Systems' founding CEO Michael Hsing also noted his company's sequential organic growth of 13.2% came in well above the industry average, and asserted, "We are well positioned with new product revenue ramping in multiple market segments for 2014 and beyond."

As it stands, while shares might look expensive trading at nearly 87 times last year's earnings, they look much more reasonable when you consider they're sitting around 22.9 times next year's estimates. Assuming the company can maintain its momentum going forward, I think there's little stopping the stock from following suit.

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