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Here's Why Silicom Ltd Stock Got a Bump Today

By Bradley Seth McNew - Apr 27, 2017 at 7:04PM

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This small technology company reported a sharp rise in Q1 profit, and management is excited about what's to come.

What happened

Shares of the Israeli technology company Silicom Ltd (SILC 0.29%) got a nice lift Thursday after the company reported Q1 earnings that were better than expected. The stock ended the day up about 13%.

So what

Silicom CEO Shaike Orbach said in the earnings release that, "Our strong first-quarter results demonstrate the growing momentum of our business." That seems to be true as the company reported Q1 sales up nearly 20% over Q1 2016. Earnings for the quarter rose to $0.35 per share, up a full 36% year over year.

An animation of circuits running on a semiconductor.

Image source: Getty Images.

Now what

Silicom provides products for major players in virtualized cloud, big data, Internet of Things (IoT), and other types of high-growth industries that support Silicom's own growth. Orbach also said in the release that:

In March, we were excited to announce the largest Design Win in our history, reflecting our selection by one of the Cloud industry's major players to deliver a critical connectivity component for its Cloud offerings. Based on the customer's guidance, once we move past final scale-up challenges, we expect this Win to build to over $30 million per year. We also believe it will pave the way to additional large opportunities.

For a small and growing technology company, Silicom is unique in that it pays a respectable 2.2% dividend yield. Additionally, even after today's rise, the stock is trading at around 16 times forward expected earnings -- relatively cheap in this current expensive market that has paid high premiums to growing technology companies. Silicom could have plenty of runway ahead if it continues to post solid growth as it did this quarter.

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